The Regal Cycle Company manufactures three types of bicycles—a dirt bike, a moun

Question

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:

Mountain

Bikes

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.

What is the impact on net operating income by discontinuing racing bikes? (Decreases should be indicated by a minus sign.)

Would a segmented income statement format be more usable to management in assessing the long-run profitability of the various product lines.

CAN YOU PLEASE HELP ME FILL IN THE BLANKS?

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:

Explanation / Answer

1a Current Total Total If Racing Bikes Are Dropped Difference: NetOperatingIncome Sales 919000 669000 -250000 Variable manufacturing and selling expenses 478000 320000 158000 Contribution margin (loss) 441000 349000 -92000 Fixed expenses: Advertising, traceable 68600 48400 20200 Depreciation on special equipment 44100 44100 0 Salaries of product manager 115700 79300 36400 Common allocated costs 183800 183800 0 Total fixed expenses 412200 355600 56600 Net operating income (loss) 28800 -6600 -35400 1b No 2a Total Dirt Bikes Mountain Bikes Racing Bikes Sales 919000 263000 406000 250000 Variable manufacturing and selling expenses 478000 119000 201000 158000 Contribution margin (loss) 441000 144000 205000 92000 Traceable fixed expenses: Advertising, traceable 68600 8300 40100 20200 Depreciation on special equipment 44100 20700 7500 15900 Salaries of product manager 115700 40600 38700 36400 Total traceable fixed expenses 228400 69600 86300 72500 Product line segment margin 212600 74400 118700 19500 Common fixed expenses 183800 Net operating income (loss) 28800 2b Yes

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.