The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a...
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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: Mountain Racing Bikes Dirt Bikes $ 262,000 111,000 Bikes $ 408,000 Total $ 250,000 157,000 93,000 $ 920,000 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 471,000 203,000 449,000 151,000 205,000 68,900 43,700 114,400 184,000 8,200 20,700 40,900 40,100 7,600 20,600 15,400 35,300 50,000 38,200 52,400 122,200 $ 28,800 81,600 411,000 167,500 121,300 Net operating income (loss) $ 38,000 $ 37,500 $ (28,300) *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. 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? Required 2 > Financial advantage (disadvantage) per quarter Financial advantage per quarter 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: Mountain Racing Bikes Dirt Bikes $ 262,000 111,000 Bikes $ 408,000 Total $ 250,000 157,000 93,000 $ 920,000 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 471,000 203,000 449,000 151,000 205,000 68,900 43,700 114,400 184,000 8,200 20,700 40,900 40,100 7,600 20,600 15,400 35,300 50,000 38,200 52,400 122,200 $ 28,800 81,600 411,000 167,500 121,300 Net operating income (loss) $ 38,000 $ 37,500 $ (28,300) *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. 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? Required 2 > Financial advantage (disadvantage) per quarter Financial advantage per quarter
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Answer rating: 100% (QA)
Requirement 1 Lost Contribution Margin 93000 Fixed costs that can be avoided advertising ... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Posted Date:
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