The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
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 $ 930,000 461,000 469,000 Dirt Bikes $ 263,000 111,000 152,000 69,600 43,100 115,300 186,000 414,000 $ 55,000 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) "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. 8,500 20,300 40,200 52,600 Mountain Bikes $ 409,000 198,000 211,000 121,600 $ 30,400 Racing Bikes $ 258,000 152,000 106,000 40,800 7,400 20,300 15,400 37,000 51,600 124,300 $ 42,900 $ (18,300) 38,100 81,800 168, 100 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. 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 $ 930,000 461,000 469,000 Dirt Bikes $ 263,000 111,000 152,000 69,600 43,100 115,300 186,000 414,000 $ 55,000 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) "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. 8,500 20,300 40,200 52,600 Mountain Bikes $ 409,000 198,000 211,000 121,600 $ 30,400 Racing Bikes $ 258,000 152,000 106,000 40,800 7,400 20,300 15,400 37,000 51,600 124,300 $ 42,900 $ (18,300) 38,100 81,800 168, 100 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.
Expert Answer:
Answer rating: 100% (QA)
SOLUTION To assess the financial advantage or disadvantage of discontinuing the Racing Bikes we need to calculate the net operating income loss for th... 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:
Students also viewed these accounting questions
-
A Quad-core server has a total computing capacity of 8 GHz (4 x 2 GHz). Virtual machines of various sizes running multiples tasks can be placed on each core of the server, provided there is...
-
Review your organization's Income Statement or the Fedex 2014 Annual Report (pp. 42 - 46 and notes begin p. 47). Discuss your general insights in addition to one of the following: Option 1) Choose a...
-
The following table shows the distribution by gender of students at Bunda Campus who use public transport and the ones who drive to school. Public Transportation (P) Drive(D) Total Male(M) 8 39 47...
-
True Or False Death benefits are used to compensate the deceaseds family for pain and suffering.
-
On January 1, Krivitz Company issued $300,000, 8%, 10-year bonds at face value. Interest is payable annually on January 1. Instructions Prepare journal entries to record the following events. (a) The...
-
A unit load AS/RS is being designed to store 1000 pallet loads in a distribution center located next to the factory. Pallet dimensions are: x = 1000 mm, y = 1200 mm; and the maximum height of a unit...
-
What is the difference between an ectotherm and an endotherm? Which vertebrates are ectotherms, and which are endotherms?
-
On May 1, Nimbus Flying School, a company that provides flying lessons, was started with an investment of $45,000 cash in the business. Following are the assets and liabilities of the company on May...
-
When does letter writing become your job instead of the doctors job? Why must you be in charge of something that could be very important to the doctor and the patient? What skillset do you need to be...
-
The trial balance for the MAD Partnership is as follows just before declaring bankruptcy. Required: A. Prepare a schedule to show how available cash would be distributed to the partners after...
-
The following transactions and events that occurred in the village of Kowitt Gorge during the calendar year 2019 1. The village commissioners adopted the following budget: Estemated revenu Property...
-
Make an abbreviated case study on the debt or equity of Apple, Costco, Walmart, or Amazon. . Helpful tips: two pages. Example of thesis format : "Based on these three factors, I believe the company...
-
"The criminal law is simply the wrong place to look for the active hand of the ruling classes. From the standpoint of the rulers the criminal justice system occupies a place not much more central...
-
What are the negative consequences of regulatory criminal law for courts and corrections? Please provide a specific example of how regulatory criminal law has negatively affected the criminal justice...
-
Explain how the criminal law could provide a backup for the tort law to hold someone accountable, how the tort law could back up the criminal law to provide some degree of accountability, and how...
-
Explain: transition materials concluding materials supporting materials introductory materials. give example also.
-
1. (Vaccine and Death Rate) Researchers are interested in examining whether COVID-19 vaccines are eective in reducing death rates among those who got the disease. To do so, researchers collected...
-
Name some of the various types of financial intermediaries described in the chapter and indicate the primary reason(s) each was created.
-
Why arent common costs allocated to segments under the contribution approach?
-
CommercialServices.com Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below: Sales . . . . . . . . . . . . . . . . . . . . . . . . . ....
-
What costs are assigned to a segment under the contribution approach?
-
An investor is considering adding three new securities to her internationally focused, fixed-income portfolio. She considers the following non-callable securities: 1-year government bond 10-year...
-
Jo Akumbas portfolio is invested in a range of developed markets fixed-income securities. She asks her adviser about the possibility of diversifying her investments to include emerging and frontier...
-
An Australian investor currently holds an A$240 million equity portfolio. He is considering rebalancing the portfolio based on an assessment of the risk and return prospects facing the Australian...
Study smarter with the SolutionInn App