- The Regal Cycle Company Manufactures Three Types Of Bicycles A Dirt Bike A Mountain Bike And A Racing Bike Data On Sa 1 (115.87 KiB) Viewed 28 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: Total $ 922,000 473,000 449,000 Dirt Bikes $ 269,000 110,000 159,000 Mountain Bikes $ 401,000 209,000 192,000 Racing Bikes $ 252,000 154,000 98,000 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) 68,600 43,200 114,600 184,400 410,800 $ 38,200 8,100 20,300 40,900 53,800 123, 100 $ 35,900 40,200 7,800 38,700 80,200 166,900 $ 25,100 20,300 15,100 35,000 50,400 120, 800 $ (22,800) *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.
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 0 0 0 0 Contribution margin (loss) Traceable fixed expenses Total traceable fixed expenses 0 0 0 0 Product line segment margin (loss) 0 S 0 $ 0 $ 0 Net operating income (loss) $ 0