Ch. 12 Exercise Problems G Juniper Design Ltd. of Mc x C Hrubec Products, Inc, O
ID: 2430557 • Letter: C
Question
Ch. 12 Exercise Problems G Juniper Design Ltd. of Mc x C Hrubec Products, Inc, Op xwww.chegg.com Files ? ? C O ezto.mheducation.com/hm.tpx?--0.10671 596289381768-1532468957359 Required 1a. What is the impact on net operating income by discontinuing racing bikes? (Decreases should be indicated by a minus sign.) Difference: Net Total It Operating Current Total Racing Bikes re Dropped Income Increase or Decrease) Contribution margin (loss) Fixed expenses Total fixed expenses Net operating income (loss) 1b. Should production and sale of the racing bikes be discontinued? O Yes O No Couldn't copy link Check your internet connection and 2a. Prepare a segmented income statement. try again. Totals Dirt Bikes Mountain Bikes Racing BikesExplanation / Answer
(1). Net operating income will be decreased by $44600
Thus there will be a financial disadvantage of discontinuing racing bike by $44600
Explanation;
Current total
Total if Racing Bike is dropped
Difference
Sales
$931000
$674000
($257000)
Variable manufacturing and selling expenses
$462000
$306000
$156000
Contribution margin
$469000
$368000
($101000)
Fixed expenses;
Advertising, traceable
$70500
$49500
$21000
Depreciation on special equipment
$43000
$43000
$0
Salaries of product line managers
$113900
$78500
$35400
Allocated common fixed expenses
$186200
$186200
$0
Total fixed expenses
$413600
$357200
$56400
Net operating income (Loss)
$55400
$10800
($44600)
(2).
Answer is (No)
Production and sale of racing bike should not be discontinued because it will result into a decrease of net operating income by $44600.
(3).
Totals
Dirt Bikes
Mountain Bikes
Racing Bikes
Sales
$931000
$267000
$407000
$257000
Variable manufacturing and selling expenses
$462000
$116000
$190000
$156000
Contribution margin
$469000
$151000
$217000
$101000
Traceable fixed expenses;
Advertising, traceable
$70500
$8600
$40900
$21000
Depreciation on special equipment
$43000
$20100
$7400
$15500
Salaries of product line managers
$113900
$40400
$38100
$35400
Total traceable fixed expenses
$227400
$69100
$86400
$71900
Product line segment margin
$241600
$81900
$130600
$29100
Common fixed expenses
$186200
Net operating income (Loss)
$55400
Current total
Total if Racing Bike is dropped
Difference
Sales
$931000
$674000
($257000)
Variable manufacturing and selling expenses
$462000
$306000
$156000
Contribution margin
$469000
$368000
($101000)
Fixed expenses;
Advertising, traceable
$70500
$49500
$21000
Depreciation on special equipment
$43000
$43000
$0
Salaries of product line managers
$113900
$78500
$35400
Allocated common fixed expenses
$186200
$186200
$0
Total fixed expenses
$413600
$357200
$56400
Net operating income (Loss)
$55400
$10800
($44600)