Question

Dirt Mountain Racing Total Bikes Bikes Bikes $ 925,000 $261,000 $ 409,000 $ 255,000 464,000 111,000 198,000 155,000 461,000 150,000 211,000 100,000 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) 70,100 8,700 40,700 20,700 44,000 20,600 7,800 15,600 114,000 40,300 38,100 35,600 185,000 52,20081,800 51,000 413,100 121,800 168,400 122,900 $ 47,900 $ 28,200 $ 42,600 $ (22,900) *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.

Answer 1

Answer:

Dirt Mountain Racing Total Bikes Bikes Bikes Sales $ 925,000 $ 261,000 $ 409,000 $ 255,000 Variable manufacturing expenses 464,000 111,000 $ 198,000 $ 155,000 Contribution Margin 461,000 $ 150,000 $ 211,000 100,000 Traceable fixed expenses Advertising 70,100 $ 8,700 $ 40,700 $ 20,700 Depreciation of special equipment 44,000 $ 20,600 $ 7,800 $ 15,600 Salaries of product line manager $ 114,000$ 40,300 $ 38,100 $ 35,600 Total traceable fixed expenses $ 228,100 $ 69,600 $ 86,600 $ 71,900 (70,100 + 44,000 (8,700 + 20,600+ (40,700 + 7,800 + (20,700 + 15,600 Calculation + 114,000) 40,300) 38,100) + 35,600) Product line segment margin $ 232,900 $ 80,400 $ 124,400 $ 28,100 Calculation (150,000 - 69,600) |(211,000 - 86,800)| (100,000 - 71,900)| Less: Common fixed expenses $ 185,000 Net operating income $ 47,900 (232,900 - Calculation 185,000)