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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: 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 $ 924,000 469,000 455,000 $ 266,000 116,000 150,000 Mountain Bikes $ 408,000 195,000 213,000 Racing Bikes $ 250,000 158,000 92,000 69,400 8,300 40,300 20,800 42,900 20,200 7,300 15,400 115,200 40,900 38,400 35,900 184,800 53,200 81,600 50,000 412,300 122,600 167,600 122,100 $ 42,700 $ 27,400 $ 45,400 $ (30,100) 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.

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 Dirt Bikes $ 924,000 469,000 455,000 $ 266,000 116,000 150,000 Mountain Bikes $ 408,000 195,000 213,000 Racing Bikes $ 250,000 158,000 92,000 69,400 8,300 40,300 20,800 42,900 20,200 7,300 15,400 115,200 40,900 38,400 35,900 184,800 53,200 81,600 50,000 412,300 122,600 167,600 122,100 $ 42,700 $ 27,400 $ 45,400 $ (30,100) 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.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter2: Basic Cost Management Concepts
Section: Chapter Questions
Problem 22E: Ellerson Company provided the following information for the last calendar year: During the year,...
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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: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses es Net operating income (loss) "Allocated on the basis of sales dollars. Total $ 924,000 469,000 Dirt Bikes 455,000 $ 266,000 116,000 150,000 Mountain Bikes $ 408,000 195,000 213,000 Racing Bikes $ 250,000 158,000 92,000 69,400 8,300 40,300 20,800 42,900 20,200 7,300 15,400 115,200 40,900 38,400 35,900 184,800 53,200 81,600 50,000 412,300 122,600 167,600 122,100 $ 42,700 $ 27,400 $ 45,400 $ (30,100) 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.
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: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses es Net operating income (loss) "Allocated on the basis of sales dollars. Total $ 924,000 469,000 Dirt Bikes 455,000 $ 266,000 116,000 150,000 Mountain Bikes $ 408,000 195,000 213,000 Racing Bikes $ 250,000 158,000 92,000 69,400 8,300 40,300 20,800 42,900 20,200 7,300 15,400 115,200 40,900 38,400 35,900 184,800 53,200 81,600 50,000 412,300 122,600 167,600 122,100 $ 42,700 $ 27,400 $ 45,400 $ (30,100) 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.
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