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 | Dirt Bikes |
Mountain Bikes | Racing Bikes |
|||||||||
Sales | $ | 930,000 | $ | 269,000 | $ | 403,000 | $ | 258,000 | ||||
Variable manufacturing and selling expenses | 468,000 | 111,000 | 199,000 | 158,000 | ||||||||
Contribution margin | 462,000 | 158,000 | 204,000 | 100,000 | ||||||||
Fixed expenses: | ||||||||||||
Advertising, traceable | 69,100 | 8,100 | 40,300 | 20,700 | ||||||||
Depreciation of special equipment | 43,500 | 20,500 | 7,600 | 15,400 | ||||||||
Salaries of product-line managers | 115,800 | 40,100 | 39,000 | 36,700 | ||||||||
Allocated common fixed expenses* | 186,000 | 53,800 | 80,600 | 51,600 | ||||||||
Total fixed expenses | 414,400 | 122,500 | 167,500 | 124,400 | ||||||||
Net operating income (loss) | $ | 47,600 | $ | 35,500 | $ | 36,500 | $ | (24,400) | ||||
*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 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 more useful to management in assessing the long-run profitability of the various product lines.
The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a mountain bike, and a...
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 Dirt Bikes Mountain Bikes Racing Bikes Sales $ 927,000 $ 269,000 $ 407,000 $ 251,000 Variable manufacturing and selling expenses 479,000 111,000 210,000 158,000 Contribution margin 448,000 158,000 197,000 93,000 Fixed expenses: Advertising, traceable 69,300 8,700 40,100 20,500 Depreciation of special equipment 44,000 20,200 8,000 15,800 Salaries of product-line managers 116,800...
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 Dirt Bikes Mountain Bikes Racing Bikes Sales $ 924,000 $ 266,000 $ 403,000 $ 255,000 Variable manufacturing and selling expenses 480,000 120,000 209,000 151,000 Contribution margin 444,000 146,000 194,000 104,000 Fixed expenses: Advertising, traceable 69,400 8,600 40,200 20,600 Depreciation of special equipment 43,900 20,400 7,800 15,700 Salaries of product-line managers 115,500...
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 Dirt Bikes Mountain Bikes Racing Bikes Sales $ 915,000 $ 262,000 $ 403,000 $ 250,000 Variable manufacturing and selling expenses 465,000 116,000 190,000 159,000 Contribution margin 450,000 146,000 213,000 91,000 Fixed expenses: Advertising, traceable 70,100 8,900 40,300 20,900 Depreciation of special equipment 43,800 21,000 7,600 15,200 Salaries of product-line managers 114,400...
The Regal Cycle Company... 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: points Dirt Mountain Racing Total Bikes Bikes Bikes Bikes $928,000 $269,000 $ 403,000 $ 256,000 460,000 111,000 192,000 157,000 468,000 158,000 211,000 99,000 eBook 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*...
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 Dirt Bikes Mountain Bikes Racing Bikes Sales $ 924,000 $ 264,000 $ 407,000 $ 253,000 Variable manufacturing and selling expenses 458,000 113,000 195,000 150,000 Contribution margin 466,000 151,000 212,000 103,000 Fixed expenses: Advertising, traceable 69,100 8,400 40,600 20,100 Depreciation of special equipment 43,400 20,500 7,200 15,700 Salaries of product-line managers 115,800...
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: *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....
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 Dirt Bikes Mountain Bikes Racing Bikes Sales $ 924,000 $ 262,000 $ 404,000 $ 258,000 Variable manufacturing and selling expenses 476,000 118,000 207,000 151,000 Contribution margin 448,000 144,000 197,000 107,000 Fixed expenses: Advertising, traceable 69,800 8,700 40,800 20,300 Depreciation of special equipment 44,300 20,700 8,000 15,600 Salaries of product-line managers 115,800...
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 Dirt Bikes Mountain Bikes Racing Bikes Sales $ 920,000 $ 269,000 $ 400,000 $ 251,000 Variable manufacturing and selling expenses 464,000 114,000 198,000 152,000 Contribution margin 456,000 155,000 202,000 99,000 Fixed expenses: Advertising, traceable 69,700 8,800 40,200 20,700 Depreciation of special equipment 43,900 20,400 8,000 15,500 Salaries of product-line managers 114,100...
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 Dirt Bikes Mountain Bikes Racing Bikes Sales $ 932,000 $ 269,000 $ 406,000 $ 257,000 Variable manufacturing and selling expenses 479,000 116,000 210,000 153,000 Contribution margin 453,000 153,000 196,000 104,000 Fixed expenses: Advertising, traceable 69,600 8,600 40,500 20,500 Depreciation of special equipment 42,900 20,400 7,200 15,300 Salaries of product-line managers 114,600...
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 Mountain Racing Total Bikes Bikes Bikes $ 925,000 $264,000 $ 404,000 $257,000 472,000 113,000 208,000 151,000 453,000 151,000 196,000 106,000 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 Net operating income (loss)...