The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a moun

Question

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: Dirt Mountain Racing Bikes Total Bikes Bikes Sales $920,000 $267,000 $400,000 253,000 154,000 Variable manufacturing and selling 477,000 115,000 208,000 expenses Contribution margin Fixed expenses: 443,000 152,000 192,000 99,000 69,300 44,400 20,900 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 20,500 15,800 35,300 50,600 122,200 $31,200 $ 28,900 $ 25,500 $ (23,200) 8,600 40,200 7,700 114,100 40,200 38,600 80,000 411,800 123,100 166,500 184,000 53,400 Total fixed expenses Net operating income (loss) 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. Answer is complete but not entirely correct Complete this question by entering your answers in the tabs below. Required 1Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Financial (disadvantage) per quarter S (8,000 Required 1 Required 2 >

Explanation / Answer

total if Difference racing bike Current are 1-a) total dropped Sales 920,000 667000 -253,000 Variable expenses 477,000 323000 154,000 contribution margin (loss) 443,000 344000 -99,000 fixed expenses Advertising,traceable 69,300 48800 20,500 Depreciation on special equipment 44,400 44,400 0 Salaries of product managers 114,100 78800 35,300 common allocated costs 184,000 184,000 0 total fixed expenses 411,800 356000 55,800 Net operating income(loss) 31,200 -12000 -43,200 Net financial disadvantage ($43,200) 2) No 3) Segmented Income statement Dirt mountain Racing total bikes bikes bikes sales 920,000 267,000 400,000 253,000 variable manufacturing and selling expense 477,000 115,000 208,000 154,000 contribution margin (loss) 443,000 152,000 192,000 99,000 traceable fixed expenses advertising 69,300 8,600 40,200 20,500 depreciation on special equipment 44,400 20,900 7,700 15,800 salaries of the product line managers 114,100 40,200 38,600 35,300 total traceable fixed expenses 227,800 69,700 86,500 71,600 product line segment margin 215,200 82,300 105,500 27,400 common fixed expenses 184,000 net operating income(loss) 31,200

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.