- The Regal Cycle Company Manufactures Three Types Of Bicycles A Dirt Bike A Mountain Bike And A Racing Bike Data On Sa 1 (413.87 KiB) Viewed 37 times
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 $ 931,000 465,000 466,000 Contribution margin (loss) Traceable fixed expenses: 70,300 44,300 115,600 186,200 416,400 $ 49,600 Total traceable fixed expenses Product line segment margin (loss) Complete this question by entering your answers in the tabs below. 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. Totals Dirt Bikes $ 269,000 119,000 150,000 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. 0 8,400 20,700 40,600 53,800 123,500 $ 26,500 0 0 0 $ Mountain Bikes $ 402,000 196,000 206,000 40,900 7,900 38,800 80,400 168,000 $ 38,000 0 0 0 Racing Bikes $ 260,000 150,000 110,000 Dirt Bikes Mountain Bikes Racing Bikes $ 21,000 15,700 36,200 52,000 124,900 $ (14,900) 0 0 0 $ 0 0 0