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The Regal Company expenses for the past quarter follow: tures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales and Total $ 917,000 460,000 457,000 70,000 44,400 Dirt Bikes $ 264,000 111,000 153,000 115,700 183,400 413,500 $ 43,500 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. Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or no the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out. 8,600 20,900 40,600 Mountain Bikes 52,800 122,900 $ 30,100 $ 402,000 191,000 211,000 40, 800 7,900 38,700 80,400 167,800 $ 43,200 Racing Bikes $ 251,000 158,000 93,000 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? 20,600 15,600 36,400 50,200 122,800 $ (29,800) 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 Company expenses for the past quarter follow: tures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales and Total $ 917,000 460,000 457,000 70,000 44,400 Dirt Bikes $ 264,000 111,000 153,000 115,700 183,400 413,500 $ 43,500 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. Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or no the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out. 8,600 20,900 40,600 Mountain Bikes 52,800 122,900 $ 30,100 $ 402,000 191,000 211,000 40, 800 7,900 38,700 80,400 167,800 $ 43,200 Racing Bikes $ 251,000 158,000 93,000 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? 20,600 15,600 36,400 50,200 122,800 $ (29,800) 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.

Financial And Managerial Accounting
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter21: Variable Costing For Management analysis
Section: Chapter Questions
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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 $ 917,000 460,000 457,000 Dirt Bikes $ 264,000 111,000 153,000 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. 70,000 44,400 115,700 183,400 413,500 $ 43,500 Required 1 < Required 1 8,600 20,900 40,600 52,800 122,900 $ 30,100 Complete this question by entering your answers in the tabs below. Mountain Bikes $ 402,000 191,000 211,000 40,800 7,900 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 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Required 2 > 38,700 80,400 167,800 $ 43,200 Racing Bikes $ 251,000 158,000 93,000 20,600 15,600 36,400 50, 200 122,800 $ (29,800)
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: Total $ 917,000 460,000 457,000 Dirt Bikes $ 264,000 111,000 153,000 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. 70,000 44,400 115,700 183,400 413,500 $ 43,500 Required 1 < Required 1 8,600 20,900 40,600 52,800 122,900 $ 30,100 Complete this question by entering your answers in the tabs below. Mountain Bikes $ 402,000 191,000 211,000 40,800 7,900 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 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Required 2 > 38,700 80,400 167,800 $ 43,200 Racing Bikes $ 251,000 158,000 93,000 20,600 15,600 36,400 50, 200 122,800 $ (29,800)
*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 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. Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) $ Totals < Required 2 0 0 Dirt Bikes Mountain Bikes Racing Bikes $ 0 0 0 $ Required 3 > 0 0 $ 0 0 0
Transcribed Image Text:*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 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. Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) $ Totals < Required 2 0 0 Dirt Bikes Mountain Bikes Racing Bikes $ 0 0 0 $ Required 3 > 0 0 $ 0 0 0
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