Answer Happy

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 $926,000 469,000 457,000 69,900 43,800 115,600 185,200 414,500 $ 42,500 Dirt Bikes $ 268,000 119,000 149,000 Required 1 8,800 20, 200 40,900 53,600 123,500 $ 25,500 Complete this question by entering your answers in the tabs below. Mountain Bikes Answer is complete but not entirely correct. $ 404,000 193,000 211,000 *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. Racing Bikes $ 254,000 157,000 97,080 40,600 20,500 7,600 16,000 38,600 36,100 80,800 50,800 167,600 123,400 $ 43,400 $ (26,400) Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Financial advantage (disadvantage) per quarter 400 x