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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 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 $ 929,000 479,000 Dirt Bikes $ 269,000 113,000 Mountain Bikes $ 400,000 Racing Bikes $ 260,000 206,000 160,000 450,000 156,000 194,000 100,000 69,600 8,400 40,600 20,600 43,100 20,300 7,500 15,300 114,400 40,300 38,300 35,800 185,800 53,800 80,000 52,000 412,900 122,800 166,400 123,700 $ 37,100 $ 33,200 $ 27,600 $ (23,700) 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

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 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 $ 929,000 479,000 Dirt Bikes $ 269,000 113,000 Mountain Bikes $ 400,000 Racing Bikes $ 260,000 206,000 160,000 450,000 156,000 194,000 100,000 69,600 8,400 40,600 20,600 43,100 20,300 7,500 15,300 114,400 40,300 38,300 35,800 185,800 53,800 80,000 52,000 412,900 122,800 166,400 123,700 $ 37,100 $ 33,200 $ 27,600 $ (23,700) 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

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 11.2.8P
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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: \table[[,,,Mountain,],[Sales,Total,Dirt Bikes,Bikes,Racing Bikes],[Variable manufacturing and selling expenses,$929,000,$269,000,$400,000,$260,000
 
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 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 $ 929,000 479,000 Dirt Bikes $ 269,000 113,000 Mountain Bikes $ 400,000 Racing Bikes $ 260,000 206,000 160,000 450,000 156,000 194,000 100,000 69,600 8,400 40,600 20,600 43,100 20,300 7,500 15,300 114,400 40,300 38,300 35,800 185,800 53,800 80,000 52,000 412,900 122,800 166,400 123,700 $ 37,100 $ 33,200 $ 27,600 $ (23,700) 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
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 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 $ 929,000 479,000 Dirt Bikes $ 269,000 113,000 Mountain Bikes $ 400,000 Racing Bikes $ 260,000 206,000 160,000 450,000 156,000 194,000 100,000 69,600 8,400 40,600 20,600 43,100 20,300 7,500 15,300 114,400 40,300 38,300 35,800 185,800 53,800 80,000 52,000 412,900 122,800 166,400 123,700 $ 37,100 $ 33,200 $ 27,600 $ (23,700) 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
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