70.2K

Verified Solution

Link Copied!

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 $921,000 $266,098 $ 405,000 $ 250,000 486,000 119,000 207,000 160,000 435,000 147,000 198,800 90,000 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) 70,300 8,600 40,800 20,900 44,100 20,700 7,880 15,6ee 114,300 40,100 38,700 35,500 184,200 53,200 81,000 50,000 412,980 122,600 168,300 122,800 $ 22,100 $ 24,400 $ 29,780 $(32,000) "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. Complete this question by enterina Vour answers in the tabs below 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? (Required 1 Required 2 >

Answer & Explanation Solved by verified expert

See Answer