Secure https:/ signment 1-1 Week 11 Practice The Regal Cycle Company manufacture
ID: 2554220 • Letter: S
Question
Secure https:/ signment 1-1 Week 11 Practice 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 Sales Varlable sanufacturing and selling expenses 465,00 115, Contribution marein Fixed expenses: s 925,000 $266,000 % 402 ,000 % 257,000 194,0 156,90 dvertising, treceable Depreciation of special equipment 9,400 8,70 4,280 20,588 7,38015,288 114,990 40,408 38,380 36,288 Hint 42,70029,280 A1 located co on fixed expenses. eroncos Total fixnd expenses Net operating income (loss) S 48,800 28,5e0 41,80 (22,300) 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 no 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 finencial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 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. Prev lot 3H1 Next > here to search TOSHIBAExplanation / Answer
1a Current Total Total If Racing Bikes Are Dropped Difference: NetOperatingIncome Sales 925000 668000 -257000 Variable manufacturing and selling expenses 465000 309000 156000 Contribution margin (loss) 460000 359000 -101000 Fixed expenses: Advertising, traceable 69400 48900 20500 Depreciation on special equipment 42700 42700 0 Salaries of product manager 114900 78700 36200 Common allocated costs 185000 183800 1200 Total fixed expenses 412000 354100 57900 Net operating income (loss) 48000 4900 -43100 Financial disadvantage=$43100 1b No 2 Total Dirt Bikes Mountain Bikes Racing Bikes Sales 925000 266000 402000 257000 Variable manufacturing and selling expenses 465000 115000 194000 156000 Contribution margin (loss) 460000 151000 208000 101000 Traceable fixed expenses: Advertising, traceable 69400 8700 40200 20500 Depreciation on special equipment 42700 20200 7300 15200 Salaries of product manager 114900 40400 38300 36200 Total traceable fixed expenses 227000 69300 85800 71900 Product line segment margin 233000 81700 122200 29100 Common fixed expenses 185000 Net operating income (loss) 48000