McGraw Hill C tml Help The Regal Cycle Company manufactures three types of bicyc
ID: 2406232 • Letter: M
Question
McGraw Hill C tml Help 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 Total $263,800 $ 404, Variable manufacturing and selling expenses 481,00 116,800 218,0 Contribution margin Fixed 155,880 sing, traceable 8,50040, 300 7,780 of special equipment 44,200 20,780 114,900 40,700 38,80 184,008 52 600 15.800 35,408 S0,600 Allocated common fixed expenses* Total fixed expenses 88,800 Net operating income (loss) s 26,480 $ 24,508 $ 26,480 $(24,580) Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes and wants a recomm the line should be discontinued The special equipment used to produce racing bikes has no resale value and does not wear out as to whether or not 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 segme profitability of the various product lines rly formatted segmented income statement that would be more useful to management in assessing the long-run Complete this question by entering your answers in the tabs below. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Pre 1 of 7 Next> Type here to searchExplanation / Answer
Incremental Analysis TOTAL Discontinue Net Increase/(Decrease) AMOUNT $ AMOUNT $ AMOUNT $ Sales Revenue 920,000 667,000 -253,000 Less: Variable cost 481,000 326,000 155,000 Contribution margin 439,000 341,000 -98,000 Less: Fixed cost Advertisement 69,500 48,800 20,700 Depreciation 44,200 44,200 0 Salary of product line manager 114,900 79,500 35,400 Common Fixed cost 184,000 184,000 0 SEGMENT MARGIN 26,400 -15,500 -41,900 No, Racing Rike Division Shall not be Discontinued SEGMENT-WISE INCOME STATEMENT TOTAL Dirt Mountain Racing AMOUNT $ AMOUNT $ AMOUNT $ AMOUNT $ Sales Revenue 920,000 263,000 404,000 253,000 Less: Variable cost 481,000 116,000 210,000 155,000 Contribution margin 439,000 147,000 194,000 98,000 Less: Traceable Expense Advertisement 69,500 8,500 40,300 20,700 Depreciation 44,200 20,700 7,700 15,800 Salary of product line manager 114,900 40,700 38,800 35,400 Total Traecable expense 228,600 69,900 86,800 71,900 SEGMENT MARGIN 210,400 77,100 107,200 26,100 Less: Common Fixed expesne 184,000 Net Operating Income 26,400