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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 $ 927,000 Dirt Bikes $ 269,000 Mountain Bikes $ 401,000 205,000 Racing Bikes $ 257,000 478,000 120,000 153,000 449,000 149,000 196,000 104,000 70,400 9,000 40,700 20,700 43,400 20,300 7,900 15,200 116,000 40,800 38,500 36,700 185,400 53,800 80,200 51,400 415,200 123,900 167,300 124,000 $ 33,800 $ 25,100 $ 28,700 $ (20,000) *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.

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 $ 927,000 Dirt Bikes $ 269,000 Mountain Bikes $ 401,000 205,000 Racing Bikes $ 257,000 478,000 120,000 153,000 449,000 149,000 196,000 104,000 70,400 9,000 40,700 20,700 43,400 20,300 7,900 15,200 116,000 40,800 38,500 36,700 185,400 53,800 80,200 51,400 415,200 123,900 167,300 124,000 $ 33,800 $ 25,100 $ 28,700 $ (20,000) *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.

Financial And Managerial Accounting
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter27: Lean Manufacturing And Activity Analysis
Section: Chapter Questions
Problem 18E: Cost of quality and value-added/non-value-added reports for a service company A. Using the...
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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 Total $ 927,000 478,000 449,000 Dirt Bikes $ 269,000 120,000 Mountain Bikes $ 401,000 205,000 Racing Bikes $ 257,000 153,000 104,000 149,000 196,000 70,400 9,000 40,700 20,700 43,400 20,300 7,900 15,200 116,000 40,800 38,500 36,700 185,400 53,800 80,200 51,400 415,200 123,900 167,300 124,000 $ 33,800 $ 25,100 $ 28,700 $ (20,000) 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. 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? Financial (disadvantage) per quarter
Transcribed Image Text: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 Total $ 927,000 478,000 449,000 Dirt Bikes $ 269,000 120,000 Mountain Bikes $ 401,000 205,000 Racing Bikes $ 257,000 153,000 104,000 149,000 196,000 70,400 9,000 40,700 20,700 43,400 20,300 7,900 15,200 116,000 40,800 38,500 36,700 185,400 53,800 80,200 51,400 415,200 123,900 167,300 124,000 $ 33,800 $ 25,100 $ 28,700 $ (20,000) 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. 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? Financial (disadvantage) per quarter
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