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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: Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Total $ 925,000 471,000 454,000 Dirt Bikes $ 266,000 111,000 155,000 69,900 43,500 115,400. 185,000 413,800 $ 40,200 Mountain Bikes $ 402,000 201,000 201,000 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. 8,500 20,800 40,400 53,200 122,900 $ 32,100 Racing Bikes $ 257,000 159,000 98,000 41,000 7,600 38,900 80,400 167,900 $33,100 20,400 15,100 36,100 51,400 123,000 $ (25,000) 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? 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: Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Total $ 925,000 471,000 454,000 Dirt Bikes $ 266,000 111,000 155,000 69,900 43,500 115,400. 185,000 413,800 $ 40,200 Mountain Bikes $ 402,000 201,000 201,000 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. 8,500 20,800 40,400 53,200 122,900 $ 32,100 Racing Bikes $ 257,000 159,000 98,000 41,000 7,600 38,900 80,400 167,900 $33,100 20,400 15,100 36,100 51,400 123,000 $ (25,000) 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? 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
Chapter17: Activity Resource Usage Model And Tactical Decision Making
Section: Chapter Questions
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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-r 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? D Show Transcribed Text Ç Required 1 Required 2 Required 3 <Required 1 Contribution margin (loss) Traceable fixed expenses: Complete this question by entering your answers in the tabs below. Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) 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 2 > < Required 2 Totals Dirt Bikes Mountain Bikes Racing Bikes Required 3 >
Transcribed Image Text: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-r 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? D Show Transcribed Text Ç Required 1 Required 2 Required 3 <Required 1 Contribution margin (loss) Traceable fixed expenses: Complete this question by entering your answers in the tabs below. Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) 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 2 > < Required 2 Totals Dirt Bikes Mountain Bikes Racing Bikes Required 3 >
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 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. Total $ 925,000 471,000 454,000 69,900 43,500 115,400 185,000 413,800 $ 40,200 Dirt Bikes $ 266,000 111,000 155,000 Mountain. Bikes $ 402,000 201,000 201,000 Racing Bikes $ 257,000 159,000 98,000 8,500 20,800 40,400 53,200 51,400 122,900 123,000 $ 32,100 $ 33,100 $ (25,000) 41,000 7,600 38,900 80,400 167,900 20,400 15,100 36,100 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: 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 Net operating income (loss) "Allocated on the basis of sales dollars. Total $ 925,000 471,000 454,000 69,900 43,500 115,400 185,000 413,800 $ 40,200 Dirt Bikes $ 266,000 111,000 155,000 Mountain. Bikes $ 402,000 201,000 201,000 Racing Bikes $ 257,000 159,000 98,000 8,500 20,800 40,400 53,200 51,400 122,900 123,000 $ 32,100 $ 33,100 $ (25,000) 41,000 7,600 38,900 80,400 167,900 20,400 15,100 36,100 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.
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