Regal Cycle Company Manufactures Assignment – Top Universities
Dropping or Retaining a Segment [LO11-2] 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 Bikes 922,eee $265,e00 485, eee 252,eee 115,000 150,e0e Mountain Racing Bikes Total Bikes 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 206,eee 473,eee 449,e00 152,eee 199,000 1ee,eee 48,1e0 7,800 38,100 81,000 167.eee 20,see 15,60e 35,30e se,4ee 121,800 69,30e 43,600 113,500 184,4ee 8,70e 28,20e 40,10e 53,e00 122,000 410,8ee 32,000 $ (21,800) 38,200 $ 28,00e Net operating income (loss) “Allocated on the basis of sales dollars. Management ie concerned about the continued lnecoe ehnAin hu +ho racing hilkoc and wanted a recommendation ae to uhothor or not Next > 10 Check my wO “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 the profitability of the various product lines more useful to management in assessing the long-run k Complete this question by entering your answers in the tabs below. t nces
Required 3 Required 1 Required 2 What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? Required 2> Required Next Help Save & Exit Submit 100 Check my wot Required 1 Required 2 Required 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 Totals Dirt Bikes Mountain Bikes Racing Bikes ok Contribution margin (loss) Traceable fixed expenses: nt ences Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) 2 of 4 .