70.2K

Verified Solution

Link Copied!

Total $ 921,000 478,000 443,000 Diet Bike $ 266,000 117,000 149,000 Mountain Bikes $. 400,000 205,000 195,000 Racing Bikan $ 255,000 156,000 99,000 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, 100 44,500 114,800 184,200 413,600 $ 29,400 9,000 20,700 40,200 53,200 123,100 $ 25,900 40,200 8,000 38,900 80,000 167,100 $ 27,900 20,900 15,800 35,700 51,000 123,400 $ (24,400) *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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? OYes No 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: 0 0 0 0 Total traceable fixed expenses Product line segment margin (loss) 0 0 0 0 $ 0 Oo 0 $ Net operating income (loss) $ 0

Answer & Explanation Solved by verified expert

See Answer