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 Bikes Sales Total $ 929,000 472,000 457,000 Dirt Bikes $ 266,000 114,000 152,000 Racing Bikes $ 257,000 154,000 103,000 $ 406,000 204,000 202,000 Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable 8,700 40,400 20,400 69,500 43,100 Depreciation of special equipment 20,200 7,500 15,400 40,100 38,800 35,600 Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses 114,500 185,800 412,900 51,400 53,200 122,200 81,200 167,900 122,800 $ 44,100 $ 29,800 Net operating income (loss) $ 34,100 $ (19,800) *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 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 Required 2 Required 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. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) 0 0 0 Traceable fixed expenses: Total traceable fixed expenses 0 Product line segment margin (loss) 0 Net operating income (loss) 0 0 $ 0 0 $ 0 O $ 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 Bikes Sales Total $ 929,000 472,000 457,000 Dirt Bikes $ 266,000 114,000 152,000 Racing Bikes $ 257,000 154,000 103,000 $ 406,000 204,000 202,000 Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable 8,700 40,400 20,400 69,500 43,100 Depreciation of special equipment 20,200 7,500 15,400 40,100 38,800 35,600 Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses 114,500 185,800 412,900 51,400 53,200 122,200 81,200 167,900 122,800 $ 44,100 $ 29,800 Net operating income (loss) $ 34,100 $ (19,800) *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 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 Required 2 Required 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. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) 0 0 0 Traceable fixed expenses: Total traceable fixed expenses 0 Product line segment margin (loss) 0 Net operating income (loss) 0 0 $ 0 0 $ 0 O $
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Answer An income statement is a financial statement that shows the companys income and expenditures ... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-0697789938
13th Edition
Authors: Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
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