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The Regal Cycle Company manufactures three types of bicycles-a dirt bike, 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) Total $ 925,000 466,000 459,000 69,100 44,100 115,600 185,000 413,800 $ 45,200 Dirt Bikes $ 266,000 111,000 155,000 8,300 20,300 40,400 53,200 Mountain Bikes $ 406,000 197,000 209,000 40,100 8,000 38,400 81,200 167,700 122,200 $ 32,500 $ 41,300 Racing Bikes $ 253,000 158,000 95,000 20,700 15,800 36,800 50,600 123,900 $ (28,900) "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 "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, 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) Total $ 925,000 466,000 459,000 69,100 44,100 115,600 185,000 413,800 $ 45,200 Dirt Bikes $ 266,000 111,000 155,000 8,300 20,300 40,400 53,200 Mountain Bikes $ 406,000 197,000 209,000 40,100 8,000 38,400 81,200 167,700 122,200 $ 32,500 $ 41,300 Racing Bikes $ 253,000 158,000 95,000 20,700 15,800 36,800 50,600 123,900 $ (28,900) "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 "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
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter6: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 1PB: Classify costs Cromwell Furniture Company manufactures sofas for distribution to several major...
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The Regal Cycle Company manufactures three types of bicycles-a dirt bike, 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) Total $ 925,000 466,000 459,000 69,100 44,100 115,600 185,000 413,800 $ 45,200 Dirt Bikes $ 266,000 111,000 155,000 Required 1 Complete this question by entering your answers in the tabs below. Mountain Bikes $ 406,000 197,000 209,000 Racing Bikes $ 253,000 158,000 95,000 8,300 40,100 20,300 8,000 40,400 38,400 36,800 53,200 81,200 50,600 122,200 167,700 123,900 $ 32,800 $ 41,300 $ (28,900) "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 "Allocated on the basis of sales dollars. 20,700 15,800 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 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 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, 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) Total $ 925,000 466,000 459,000 69,100 44,100 115,600 185,000 413,800 $ 45,200 Dirt Bikes $ 266,000 111,000 155,000 Required 1 Complete this question by entering your answers in the tabs below. Mountain Bikes $ 406,000 197,000 209,000 Racing Bikes $ 253,000 158,000 95,000 8,300 40,100 20,300 8,000 40,400 38,400 36,800 53,200 81,200 50,600 122,200 167,700 123,900 $ 32,800 $ 41,300 $ (28,900) "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 "Allocated on the basis of sales dollars. 20,700 15,800 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 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 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.
Required 1 Required 2 Contribution margin (loss) Traceable fixed expenses Should the production and Should the production and sale of racing bikes be discontinued? Required 3 Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) Required 2 Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-ru profitability of the various product lines. or racing bikes be discontinued? Totals Dirt Bikes Mountain Bikes Racing Bikes
Transcribed Image Text:Required 1 Required 2 Contribution margin (loss) Traceable fixed expenses Should the production and Should the production and sale of racing bikes be discontinued? Required 3 Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) Required 2 Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-ru profitability of the various product lines. or racing bikes be discontinued? Totals Dirt Bikes Mountain Bikes Racing Bikes
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