Homework Help is Here – Start Your Trial Now!
Business
Accounting
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 Dirt Bikes $ 269,000 119,000 150,000 Total Bikes $ 925,000 466,000 459,000 $ 402,000 196,000 206,000 Racing Bikes $ 254,000 151,000 103,000 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 70,300 43,300 116,100 185,000 414,700 40,600 7,700 38,600 80,400 167,300 9,000 20,100 41,000 53,800 20,700 15,500 36,500 50,800 123,500 123,900 Net operating income (loss) $ 44,300 $ 26,100 $ 38,700 $ (20,500) *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.

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 Dirt Bikes $ 269,000 119,000 150,000 Total Bikes $ 925,000 466,000 459,000 $ 402,000 196,000 206,000 Racing Bikes $ 254,000 151,000 103,000 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 70,300 43,300 116,100 185,000 414,700 40,600 7,700 38,600 80,400 167,300 9,000 20,100 41,000 53,800 20,700 15,500 36,500 50,800 123,500 123,900 Net operating income (loss) $ 44,300 $ 26,100 $ 38,700 $ (20,500) *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.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter16: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 39P
See similar textbooks
icon
Related questions
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: Mountain Racing Bikes $ 254,000 151,000 Total Dirt Bikes Bikes $ 925,000 466,000 459,000 $ 269,000 119,000 150,000 $ 402,000 196,000 206,000 Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: 103,000 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses 70,300 43,300 116,100 185,000 414,700 $ 44,300 9,000 20,100 41,000 53,800 123,900 $ 26,100 40,600 7,700 38,600 80,400 167,300 20,700 15,500 36,500 50,800 123,500 $ (20,500) Net operating income (loss) $ 38,700 *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 (disadvar 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. per quarter of discontinuing the Racing Bikes?
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: Mountain Racing Bikes $ 254,000 151,000 Total Dirt Bikes Bikes $ 925,000 466,000 459,000 $ 269,000 119,000 150,000 $ 402,000 196,000 206,000 Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: 103,000 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses 70,300 43,300 116,100 185,000 414,700 $ 44,300 9,000 20,100 41,000 53,800 123,900 $ 26,100 40,600 7,700 38,600 80,400 167,300 20,700 15,500 36,500 50,800 123,500 $ (20,500) Net operating income (loss) $ 38,700 *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 (disadvar 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. per quarter of discontinuing the Racing Bikes?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 3 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Break-even Analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser…
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS