The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating income (loss) Total $ 924,000 472,000 452,000 69,600 44,200 114,500 184,800 413,100 $ 38,900 Dirt Bikes $ 269,000 115,000 154,000 Mountain Bikes $ 402,000 203,000 199,000 Complete this question by entering your answers in the tabs below. 8,400 40,600 20,700 7,700 40,700 38,200 53,800 80,400 123,600 166,900 $ 30,400 $ 32,100 Racing Bikes $ 253,000 154,000 99,000 "Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out 20,600 15,800 35,600 50,600 122,600 $ (23,600) Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued? 3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines. Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating income (loss) Total $ 924,000 472,000 452,000 69,600 44,200 114,500 184,800 413,100 $ 38,900 Dirt Bikes $ 269,000 115,000 154,000 Mountain Bikes $ 402,000 203,000 199,000 Complete this question by entering your answers in the tabs below. 8,400 40,600 20,700 7,700 40,700 38,200 53,800 80,400 123,600 166,900 $ 30,400 $ 32,100 Racing Bikes $ 253,000 154,000 99,000 "Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out 20,600 15,800 35,600 50,600 122,600 $ (23,600) Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued? 3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines. Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Vishal
Transcribed Image Text:The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales and
expenses for the past quarter follow
Sales
Variable manufacturing and selling expenses
Contribution margin
Fixed expenses:
Advertising, traceable.
Depreciation of special equipment
Salaries of product-line managers
Allocated common fixed expenses
Total fixed expenses
Net operating income (loss)
Total
$ 924,000
472,000
452,000
69,600
44,200
114,500
184,800
413,100
$ 38,900
Required 1
Dirt Bikes
$ 269,000
115,000
154,000
Complete this question by entering your answers in the tabs below.
Mountain
Bikes
$ 402,000
203,000
199,000
8,400
40,600
20,700
7,700
40,700
38,200
53,800
80,400
123,600
166,900
$ 30,400 $ 32,100
"Allocated on the basis of sales dollars.
Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not
the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out.
Racing Bikes
$ 253,000
154,000
99,000
Required:
1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
2. Should the production and sale of racing bikes be discontinued?
3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run
profitability of the various product lines.
Required 2 Required 3
What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
20,600
15,800
35,600
50,600
122,600
$ (23,600)
Transcribed Image Text:Required 1 Required 2 Required 3
Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run
profitability of the various product lines.
Contribution margin (loss)
Traceable fixed expenses:
Total traceable fixed expenses
Product line segment margin (loss)
Net operating income (loss)
Totals
< Required 2
Dirt Bikes Mountain Bikes Racing Bikes
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