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: Check 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 Dirt Bikes $ 923,000 465,000 458,000 $ 267,000 113,000 154,000 Mountain Bikes $ 405,000 195,000 210,000 Racing Bikes $ 251,000 157,000 94,000 68,500 8,100 40,200 20,200 43,700 20,300 7,500 15,900 115,600 40,300 38,900 36,400 184,600 53,400 81,000 50,200 412,400 122,100 167,600 122,700 $ 45,600 $ 31,900 $ 42,400 $ (28,700) 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 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? < Prev 2 of 7 Next >
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: Check 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 Dirt Bikes $ 923,000 465,000 458,000 $ 267,000 113,000 154,000 Mountain Bikes $ 405,000 195,000 210,000 Racing Bikes $ 251,000 157,000 94,000 68,500 8,100 40,200 20,200 43,700 20,300 7,500 15,900 115,600 40,300 38,900 36,400 184,600 53,400 81,000 50,200 412,400 122,100 167,600 122,700 $ 45,600 $ 31,900 $ 42,400 $ (28,700) 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 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? < Prev 2 of 7 Next >
Chapter9: Responsibility Accounting And Decentralization
Section: Chapter Questions
Problem 8EA: Using the information in the previous exercises about Marleys Manufacturing, determine the operating...
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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:
Check
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
Dirt Bikes
$ 923,000
465,000
458,000
$ 267,000
113,000
154,000
Mountain
Bikes
$ 405,000
195,000
210,000
Racing Bikes
$ 251,000
157,000
94,000
68,500
8,100
40,200
20,200
43,700
20,300
7,500
15,900
115,600
40,300
38,900
36,400
184,600
53,400
81,000
50,200
412,400
122,100
167,600
122,700
$ 45,600
$ 31,900
$ 42,400
$ (28,700)
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
What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
< Prev
2 of 7
Next >
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