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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 $ 929,000 $269,000 $400,000 $ 260,000 Dirt Bikes Racing Bikes Total Sales Variable manufacturing and selling 466,000 118,000 193,000 155,000 expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses 463,000 151,000 207,000 105,000 69,400 43,300 114,800 185,800 413,300 8,900 20,300 40,300 53,800 20,400 15,800 35,700 52,000 123,900 40,100 7,200 38,800 80,000 166,100 $ 49,700 $ 27,700 $ 40,900 $(18,900) 123,300 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. 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 Bikes $ 929,000 $269,000 $400,000 $ 260,000 Dirt Bikes Racing Bikes Total Sales Variable manufacturing and selling 466,000 118,000 193,000 155,000 expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses 463,000 151,000 207,000 105,000 69,400 43,300 114,800 185,800 413,300 8,900 20,300 40,300 53,800 20,400 15,800 35,700 52,000 123,900 40,100 7,200 38,800 80,000 166,100 $ 49,700 $ 27,700 $ 40,900 $(18,900) 123,300 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. 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.

Managerial Accounting: The Cornerstone of Business Decision-Making
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter2: Basic Managerial Accounting Concepts
Section: Chapter Questions
Problem 54P: Preparation of Income Statement: Manufacturing Firm Laworld Inc. manufactures small camping tents....
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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 $ 929,000 $269,000 $400,000 $ 260,000 Dirt Bikes Racing Bikes Total 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 466,000 118,000 193,000 155,000 463,000 151,000 207,000 105,000 69,400 43,300 114,800 185,800 413,300 8,900 20,300 40,300 53,800 40,100 7,200 38,800 20,400 15,800 35,700 52,000 123,900 80,000 166,100 $ 49,700 $ 27,700 $ 40,900 $(18,900) 123,300 es 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. 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.
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 Bikes $ 929,000 $269,000 $400,000 $ 260,000 Dirt Bikes Racing Bikes Total 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 466,000 118,000 193,000 155,000 463,000 151,000 207,000 105,000 69,400 43,300 114,800 185,800 413,300 8,900 20,300 40,300 53,800 40,100 7,200 38,800 20,400 15,800 35,700 52,000 123,900 80,000 166,100 $ 49,700 $ 27,700 $ 40,900 $(18,900) 123,300 es 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. 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.
Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? Required 1 Required 2 >
Transcribed Image Text:Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? Required 1 Required 2 >
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