The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing
Question:
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 | $ 923,000 | $ 269,000 | $ 401,000 | $ 253,000 |
---|---|---|---|---|
Variable manufacturing and selling expenses | 458,000 | 113,000 | 195,000 | 150,000 |
Contribution margin | 465,000 | 156,000 | 206,000 | 103,000 |
Fixed expenses: | ||||
Advertising, traceable | 70,100 | 9,000 | 40,400 | 20,700 |
Depreciation of special equipment | 44,100 | 20,700 | 7,500 | 15,900 |
Salaries of product-line managers | 115,300 | 40,100 | 38,800 | 36,400 |
Allocated common fixed expenses* | 184,600 | 53,800 | 80,200 | 50,600 |
Total fixed expenses | 414,100 | 123,600 | 166,900 | 123,600 |
Net operating income (loss) | $ 50,900 | $ 32,400 | $ 39,100 | $ (20,600) |
*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.
- Required 1
- Required 2
- Required 3
What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
required 1:
What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
required 2:
Should the production and sale of racing bikes be discontinued?
|
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.
|
Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer