The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a...
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The Regal Cycle Company manufactures three types of bicyclesa 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) *Allocated on the basis of sales dollars. Total $ 922,000 Dirt Bikes 459,000 463,000 $ 261,000 117,000 144,000 Mountain Bikes $ 406,000 191,000 215,000 Racing Bikes $ 255,000 151,000 104,000 70,000 8,400 40,800 20,800 43,800 20,600 7,200 16,000 113,600 40,100 38,500 35,000 184,400 52,200 81,200 51,000 411,800 121,300 167,700 122,800 $ 51,200 $ 22,700 $ 47,300 $ (18,800) 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? The Regal Cycle Company manufactures three types of bicyclesa 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) *Allocated on the basis of sales dollars. Total $ 922,000 Dirt Bikes 459,000 463,000 $ 261,000 117,000 144,000 Mountain Bikes $ 406,000 191,000 215,000 Racing Bikes $ 255,000 151,000 104,000 70,000 8,400 40,800 20,800 43,800 20,600 7,200 16,000 113,600 40,100 38,500 35,000 184,400 52,200 81,200 51,000 411,800 121,300 167,700 122,800 $ 51,200 $ 22,700 $ 47,300 $ (18,800) 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?
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