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) *Allocated on the basis of sales dollars. Total $ 924,000 465,000 459,000 Dirt Bikes $ 263,000 120,000 143,000 Mountain Bikes $ 403,000 192,000 Racing Bikes $ 258,000 153,000 211,000 105,000 70,200 8,700 41,000 20,500 43,900 20,700 7,200 16,000 114,400 40,100 39,000 35,300 184,800 52,600 413,300 122,100 80,600 167,800 51,600 123,400 $ 45,700 $ 20,900 $ 43,200 $ (18,400) 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. 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. Complete this question by entering your answers in the tabs below. 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) *Allocated on the basis of sales dollars. Total $ 924,000 465,000 459,000 Dirt Bikes $ 263,000 120,000 143,000 Mountain Bikes $ 403,000 192,000 Racing Bikes $ 258,000 153,000 211,000 105,000 70,200 8,700 41,000 20,500 43,900 20,700 7,200 16,000 114,400 40,100 39,000 35,300 184,800 52,600 413,300 122,100 80,600 167,800 51,600 123,400 $ 45,700 $ 20,900 $ 43,200 $ (18,400) 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. 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. Complete this question by entering your answers in the tabs below. 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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Please help on all 3 requirements
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)
*Allocated on the basis of sales dollars.
Total
$ 924,000
465,000
459,000
Dirt Bikes
$ 263,000
120,000
143,000
Mountain
Bikes
$ 403,000
192,000
Racing Bikes
$ 258,000
153,000
211,000
105,000
70,200
8,700
41,000
20,500
43,900
20,700
7,200
16,000
114,400
40,100
39,000
35,300
184,800
52,600
413,300
122,100
80,600
167,800
51,600
123,400
$ 45,700
$ 20,900
$ 43,200
$ (18,400)
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.
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.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2 Required 3
What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
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