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 $ 923,000 467,000 Dirt Bikes $ 266,000 115,000 Mountain Bikes $ 404,000 Racing Bikes $ 253,000 193,000 159,000 456,000 151,000 211,000 94,000 69,700 8,700 40,800 20,200 43,700 20,800 7,400 15,500 114,800 40,800 38,800 35,200 184,600 53,200 80,800 50,600 412,800 123,500 167,800 121,500 $ 43,200 $ 27,500 $ 43,200 $ (27,500) Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wea 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. Answer is complete but not entirely correct. 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? Financial advantage (disadvantage) per quarter $ 23,000 x
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 $ 923,000 467,000 Dirt Bikes $ 266,000 115,000 Mountain Bikes $ 404,000 Racing Bikes $ 253,000 193,000 159,000 456,000 151,000 211,000 94,000 69,700 8,700 40,800 20,200 43,700 20,800 7,400 15,500 114,800 40,800 38,800 35,200 184,600 53,200 80,800 50,600 412,800 123,500 167,800 121,500 $ 43,200 $ 27,500 $ 43,200 $ (27,500) Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wea 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. Answer is complete but not entirely correct. 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? Financial advantage (disadvantage) per quarter $ 23,000 x
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Gadubhai
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
$ 923,000
467,000
Dirt Bikes
$ 266,000
115,000
Mountain
Bikes
$ 404,000
Racing Bikes
$ 253,000
193,000
159,000
456,000
151,000
211,000
94,000
69,700
8,700
40,800
20,200
43,700
20,800
7,400
15,500
114,800
40,800
38,800
35,200
184,600
53,200
80,800
50,600
412,800
123,500
167,800
121,500
$ 43,200
$ 27,500
$ 43,200 $ (27,500)
Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether
not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wea
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.
Answer is complete but not entirely correct.
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?
Financial advantage (disadvantage) per quarter
$ 23,000 x
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