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ThatDudeLv1
18 Jul 2022
The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Dats on sales and expenses for the past quarter follow:
Total
Dirt Bikes
Mountain Bikes
Racing Bikes
Sales
$ 928,000
$ 269,000
$ 407,000
$ 252,000
Variable manufacturing and selling expenses
467,000
120,000
195,000
152,000
Contribution margin
461,000
149,000
212,000
100,000
Fixed expenses:
Advertising, traceable
69,500
8,500
40,100
20,900
Depreciation of special equipment
42,900
20,300
7,500
15,100
Salaries of product-lime managers
115,600
40,300
38,300
37,000
Allocated common fixed expenses*
185,600
53,800
81,400
50,400
Total fixed expenses
413,600
122,900
167,300
123,400
Net operating income (loss)
$ 47,400
$ 26,100
$ 44,700
$ (23,400)
"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 facing 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 bices 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
What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
Financial advantage (disadvantage) per quarter $ _________
The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Dats on sales and expenses for the past quarter follow:
Total | Dirt Bikes | Mountain Bikes | Racing Bikes |
Sales | $ 928,000 | $ 269,000 | $ 407,000 | $ 252,000 |
Variable manufacturing and selling expenses | 467,000 | 120,000 | 195,000 | 152,000 |
Contribution margin | 461,000 | 149,000 | 212,000 | 100,000 |
Fixed expenses: | ||||
Advertising, traceable | 69,500 | 8,500 | 40,100 | 20,900 |
Depreciation of special equipment | 42,900 | 20,300 | 7,500 | 15,100 |
Salaries of product-lime managers | 115,600 | 40,300 | 38,300 | 37,000 |
Allocated common fixed expenses* | 185,600 | 53,800 | 81,400 | 50,400 |
Total fixed expenses | 413,600 | 122,900 | 167,300 | 123,400 |
Net operating income (loss) | $ 47,400 | $ 26,100 | $ 44,700 | $ (23,400) |
"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 facing 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 bices 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
What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?
Financial advantage (disadvantage) per quarter $ _________
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