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 | $ | 929,000 | $ | 266,000 | $ | 404,000 | $ | 259,000 | ||||
Variable manufacturing and selling expenses | 471,000 | 117,000 | 197,000 | 157,000 | ||||||||
Contribution margin | 458,000 | 149,000 | 207,000 | 102,000 | ||||||||
Fixed expenses: | ||||||||||||
Advertising, traceable | 69,400 | 8,500 | 40,700 | 20,200 | ||||||||
Depreciation of special equipment | 43,100 | 20,100 | 7,300 | 15,700 | ||||||||
Salaries of product-line managers | 114,400 | 40,100 | 38,800 | 35,500 | ||||||||
Allocated common fixed expenses* | 185,800 | 53,200 | 80,800 | 51,800 | ||||||||
Total fixed expenses | 412,700 | 121,900 | 167,600 | 123,200 | ||||||||
Net operating income (loss) | $ | 45,300 | $ | 27,100 | $ | 39,400 | $ | (21,200) | ||||
*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 $ 918,000 $ 262,000 $ 404,000 $ 252,000 Variable manufacturing and selling expenses 458,000 110,000 195,000 153,000 Contribution margin 460,000 152,000 209,000 99,000 Fixed expenses: Advertising, traceable 70,300 8,700 40,900 20,700 Depreciation of special equipment 44,000 20,500 7,600 15,900 Salaries of product-line managers 115,100...
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 $ 929,000 $ 269,000 $ 408,000 $ 252,000 Variable manufacturing and selling expenses 464,000 117,000 194,000 153,000 Contribution margin 465,000 152,000 214,000 99,000 Fixed expenses: Advertising, traceable 69,500 8,500 40,900 20,100 Depreciation of special equipment 43,500 20,200 7,800 15,500 Salaries of product-line managers 116,600...
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: 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 $ 928,000 $ 267,000 $ 401,000 $ 260,000 Variable manufacturing and selling expenses 458,000 113,000 193,000...
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 $ 920,000 $262,000 $ 400,000 $ 258,000 455,000 111,000 191,000 153,000 465,000 151,000 209,000 105,000 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...
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 $ 265,000 $ 410,000 $ 252,000 Variable manufacturing and selling expenses 471,000 112,000 201,000 158,000 Contribution margin 456,000 153,000 209,000 94,000 Fixed expenses: Advertising, traceable 69,400 8,200 40,400 20,800 Depreciation of special equipment 43,600 20,300 7,700 15,600 Salaries of product-line managers 115,400...
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 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:TotalDirtBikesMountain BikesRacingBikesSales$928,000$267,000$401,000$260,000Variable manufacturing and selling expenses458,000113,000193,000152,000Contribution margin470,000154,000208,000108,000Fixed expenses:Advertising, traceable70,0008,70040,90020,400Depreciation of special equipment43,10020,8007,20015,100Salaries of product-line managers114,80040,80038,90035,100Allocated common fixed expenses*185,60053,40080,20052,000Total fixed expenses413,500123,700167,200122,600Net operating income (loss)$56,500$30,300$40,800$(14,600)*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...
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 Sales $ 922,000 $264,000 $ 402,000 $ 256,000 Variable manufacturing and selling expenses_ 462,000 120,000 190,000 152,000 Contribution margin 460,000 144,000 212,000 104,000 Fixed expenses: Advertising, traceable 69,700 8,200 40,800 20,700 Depreciation of special equipment 43,100 20,300 7,200 15,600 Salaries of product-line managers 115,100 40,700...
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 $ 406,000 $ 252,000 Variable manufacturing and selling expenses 471,000 115,000 197,000 159,000 Contribution margin 456,000 154,000 209,000 93,000 Fixed expenses: Advertising, traceable 70,300 8,700 41,000 20,600 Depreciation of special equipment 43,900 20,900 7,500 15,500 Salaries of product-line managers 115,900...
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 $ 933,000 $ 264,000 $ 410,000 $ 259,000 Variable manufacturing and selling expenses 473,000 118,000 198,000 157,000 Contribution margin 460,000 146,000 212,000 102,000 Fixed expenses: Advertising, traceable 69,800 8,200 41,000 20,600 Depreciation of special equipment 43,800 20,700 7,200 15,900 Salaries of product-line managers 114,500...