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) Required 1 Required 2 Required 3 Yes No Required 1 Required 2 Required 3 Total $ Contribution margin (loss) Traceable fixed expenses: $ Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) Dirt Bikes 933,000 481,000 452,000 Totals 69,300 42,800 114,800 186,600 Should the production and sale of racing bikes be discontinued? 413,500 38,500 Mountain Bikes Racing Bikes $ $ 270,000 $ 410,000 $ 253,000 116,000 154,000 Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? 8,200 20,300 40,600 54,000 123,100 Prepare a properly formatted segmented income statement that would be more useful to management in assessing the run profitability of the various product lines. 30,900 210,000 Dirt Bikes Mountain Bikes Racing Bikes 200,000 40,500 7,300 38,900 *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. 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. 82,000 168,700 $ 31,300 155,000 98,000 20,600 15,200 35,300 50,600 121,700 $ (23,700)

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) Required 1 Required 2 Required 3 Yes No Required 1 Required 2 Required 3 Total $ Contribution margin (loss) Traceable fixed expenses: $ Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) Dirt Bikes 933,000 481,000 452,000 Totals 69,300 42,800 114,800 186,600 Should the production and sale of racing bikes be discontinued? 413,500 38,500 Mountain Bikes Racing Bikes $ $ 270,000 $ 410,000 $ 253,000 116,000 154,000 Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? 8,200 20,300 40,600 54,000 123,100 Prepare a properly formatted segmented income statement that would be more useful to management in assessing the run profitability of the various product lines. 30,900 210,000 Dirt Bikes Mountain Bikes Racing Bikes 200,000 40,500 7,300 38,900 *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. 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. 82,000 168,700 $ 31,300 155,000 98,000 20,600 15,200 35,300 50,600 121,700 $ (23,700)

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

Problem 12E: Galaxy Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the...

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