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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: Dirt Mountain Racing Total Bikes Bikes Bikes Sales $ 926,000 $270,000 $ 405,000 $ 251, 000 Variable manufacturing and selling 466,000 117,000 198,000 151,000 expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses 460,000 153,000 207,000 100,000 69,600 43,700 8,600 20,500 40,500 7,300 20,500 115,000 185,200 40,700 54,000 38,700 81,000 15,900 35,600 50,200 413,500 123,800 167,500 122,200 Net operating income (loss) $ 46,500 $ 29,200 $ 39,500 $(22,200)

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: Dirt Mountain Racing Total Bikes Bikes Bikes Sales $ 926,000 $270,000 $ 405,000 $ 251, 000 Variable manufacturing and selling 466,000 117,000 198,000 151,000 expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses 460,000 153,000 207,000 100,000 69,600 43,700 8,600 20,500 40,500 7,300 20,500 115,000 185,200 40,700 54,000 38,700 81,000 15,900 35,600 50,200 413,500 123,800 167,500 122,200 Net operating income (loss) $ 46,500 $ 29,200 $ 39,500 $(22,200)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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2) What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes?

 
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: Dirt Mountain Racing Total Bikes Bikes Bikes Sales $ 926,000 $270,000 $ 405,000 $ 251,000 Variable manufacturing and selling 466,000 117,000 198,000 151,000 expenses Contribution margin 460,000 153,000 207,000 100,000 Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 69,600 43,700 115,000 185,200 20,500 15,900 35,600 50,200 122,200 $ 46,500 $ 29,200 $ 39,500 $ ( 22,200) 8,600 20,500 40,700 54,000 40,500 7,300 38,700 81,000 Total fixed expenses 413,500 123,800 167,500 Net operating income (loss)
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: Dirt Mountain Racing Total Bikes Bikes Bikes Sales $ 926,000 $270,000 $ 405,000 $ 251,000 Variable manufacturing and selling 466,000 117,000 198,000 151,000 expenses Contribution margin 460,000 153,000 207,000 100,000 Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 69,600 43,700 115,000 185,200 20,500 15,900 35,600 50,200 122,200 $ 46,500 $ 29,200 $ 39,500 $ ( 22,200) 8,600 20,500 40,700 54,000 40,500 7,300 38,700 81,000 Total fixed expenses 413,500 123,800 167,500 Net operating income (loss)
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. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss)
Transcribed Image Text: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. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss)
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What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?

 
 
 
   

 

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Discontinuing operations for a product or a service line
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