Swed Chapter 12 Homework #1 Exercise 12-2 Dropping or Retaining a Segment (L012-2] 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 points Dirt Mountain Racing Total Bikes Bikes Bikes $934,000 $268,000 $409,000 $257,000 468,000 113,000 197,000 158,000 Sales Variable manufacturing and selling expenses eBook 466,000 Contribution margin 155,000 212,000 Hint 99,000 Print Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 70,000 43,400 114,900 186,800 8,200 20,300 40.800 53,600 41,000 7,300 38,100 81,800 20.800 15,800 36,000 51,400 References Total fixed expenses 415,100 122,900 168,200 124.000 Net operating income (loss) $ 50,900 $ 32,100 $ 43,800 $(25,000) *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. Saved Chapter 12 Homework #1 i Required: 1a. What is the impact on net operating income by discontinuing racing bikes? (Decreases should be indicated by a minus sign.) points Total If Current Total Racing Bikes Are Dropped Difference: Net Operating Income Increase or (Decrease) eBook / / / / Hint Contribution margin (loss) Fixed expenses: o / / / / / / / / Print / / / / / / References / / / Total fixed expenses Net operating income (loss) / / / $ 0 $ 0 $ / / / 1b. Should production and sale of the racing bikes be discontinued? Yes No Graw Grades - 202-ACCT202-04-12 Saved Chapter 12 Homework #10 2a. Prepare a segmented income statement. Totals Dirt Bikes Mountain Bikes Racing Bikes points I 0 Contribution margin (loss) Traceable fixed expenses: eBook . Hint Total traceable fixed expenses ol lololo 00 0 $ 0 $ 6 Print Net operating income (loss) References 2b. Would a segmented income statement format be more usable to management in assessing the long-run profitability of the various product lines. Yes No