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Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Total $ 923,000 482,000 441,000 Dirt Bikes $ 266,000 119,000 147,000 69,900 43,300 115,600 184,600 413,400 $ 27,600 Mountain Bikes $ 402,000 204,000 198,000 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. 9,000 20,700 40,300 53,200 123,200 $ 23,800 Racing Bikes $ 255,000 159,000 96,000 40,400 7,300 38,600 80,400 166,700 $ 31,300 20,500 15,300 36,700 51,000 123,500 $ (27,500) 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.

Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Total $ 923,000 482,000 441,000 Dirt Bikes $ 266,000 119,000 147,000 69,900 43,300 115,600 184,600 413,400 $ 27,600 Mountain Bikes $ 402,000 204,000 198,000 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. 9,000 20,700 40,300 53,200 123,200 $ 23,800 Racing Bikes $ 255,000 159,000 96,000 40,400 7,300 38,600 80,400 166,700 $ 31,300 20,500 15,300 36,700 51,000 123,500 $ (27,500) 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.

Survey of Accounting (Accounting I)
Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter11: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 11.2.5P
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Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? OYes ONO 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. Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Advertising, traceable Common fixed expenses Depreciation of special equipment Salaries of the product line managers Sales Variable manufacturing and selling expenses Totals red 2 Dirt Bikes Mountain Bikes Racing Bikes Required 3 >
Transcribed Image Text:Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? OYes ONO 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. Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Advertising, traceable Common fixed expenses Depreciation of special equipment Salaries of the product line managers Sales Variable manufacturing and selling expenses Totals red 2 Dirt Bikes Mountain Bikes Racing Bikes Required 3 >
Exercise 11-2 (Algo) Dropping or Retaining a Segment[LO11-2] 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: Sales Variable manufacturing and selling expenses Contribution margin Total $ 923,000 482,000 441,000 Dirt Bikes $ 266,000 119,000 147,000 69,900 43,300 115,600 184,600 413,400 $ 27,600 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. 9,000 20,700 40,300 53,200 123,200 $ 23,800 Financial advantage (disadvantage) per quarter Financial advantage per quarter Mountain Bikes Complete this question by entering your answers in the tabs below. $ 402,000 204,000 198,000 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? 40,400 7,300 Required 2 > 38,600 80,400 166,700 $ 31,300 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? Racing Bikes $ 255,000 159,000 96,000 20,500 15,300 36,700 51,000 123,500 $ (27,500)
Transcribed Image Text:Exercise 11-2 (Algo) Dropping or Retaining a Segment[LO11-2] 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: Sales Variable manufacturing and selling expenses Contribution margin Total $ 923,000 482,000 441,000 Dirt Bikes $ 266,000 119,000 147,000 69,900 43,300 115,600 184,600 413,400 $ 27,600 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. 9,000 20,700 40,300 53,200 123,200 $ 23,800 Financial advantage (disadvantage) per quarter Financial advantage per quarter Mountain Bikes Complete this question by entering your answers in the tabs below. $ 402,000 204,000 198,000 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? 40,400 7,300 Required 2 > 38,600 80,400 166,700 $ 31,300 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? Racing Bikes $ 255,000 159,000 96,000 20,500 15,300 36,700 51,000 123,500 $ (27,500)
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