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Homework answers / question archive / The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike

The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike

Accounting

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: Total Dirt Mountain Racing Bikes Bikes Bikes $ 936,000 $270,000 $ 406,000 $ 260,000 459,000 113,000 191,000 155,000 477,000 215,000 105,000 157,000 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) 68,800 8,200 44,100 20,800 113,700 40,600 187,200 54,000 413,800 123,600 $ 63,200 $ 33,400 40,400 20,200 7,600 15,700 38,100 35,000 81,200 52,000 167,300 122,900 47,700 $ (17,900) *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. 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? < Required 1 Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? OYes ONO < Required 1 Required 3 > Complete this question by entering your answers in the tabs below. 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. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) < Required 2 Required 3

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