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 Sales Dirt Bikes Mountain Bikes Racing Bikes Total $90,000 $150,000 $70,000 $310,000 Variable manufacturing and selling 27,000 60,000 40,000 127,000 expenses Contribution Margin $63,000 $ 90,000 $30,000 $183,000 Fixed expenses Advertising 10,000 14,000 15,000 39,000 Depreciation of special equipment 6,000 9,000 2,000 17,000 Salaries of product line managers 12,000 13,000 18,000 43,000 Allocated common fixed expense 18,000 30,000 4,000 52,000 Total fixed expenses $46,000 $66,000 $39,000 $151,000 Net operating income (loss) $17,000 $24,000 $ (9,000) $ 32,000 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. Should production and sale of the racing bikes be discontinued? Explain. Show computations to support your answer.

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 Sales Dirt Bikes Mountain Bikes Racing Bikes Total $90,000 $150,000 $70,000 $310,000 Variable manufacturing and selling 27,000 60,000 40,000 127,000 expenses Contribution Margin $63,000 $ 90,000 $30,000 $183,000 Fixed expenses Advertising 10,000 14,000 15,000 39,000 Depreciation of special equipment 6,000 9,000 2,000 17,000 Salaries of product line managers 12,000 13,000 18,000 43,000 Allocated common fixed expense 18,000 30,000 4,000 52,000 Total fixed expenses $46,000 $66,000 $39,000 $151,000 Net operating income (loss) $17,000 $24,000 $ (9,000) $ 32,000 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. Should production and sale of the racing bikes be discontinued? Explain. Show computations to support your answer.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 39P

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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. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) $ $ $ Net operating income (loss)
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 $ 925,000 $ 265,000 $ 402,000 $ 258,000 Variable manufacturing and selling expenses 466,000 111,000 195,000 160,000 Contribution margin 459,000 154,000 207,000 98,000 Fixed expenses: Advertising, traceable 69,000 8,200 40,500 20,300 Depreciation of special equipment 43,200 20,100 7,700 15,400 Salaries of product-line managers 114,400 40,400 38,900 35,100 Allocated common fixed expenses* 185,000 53,000 80,400 51,600 Total fixed expenses 411,600 121,700 167,500 122,400 Net operating income (loss) $ 47,400 $ 32,300 $ 39,500 $ (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.…
he 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 DirtBikes Mountain Bikes RacingBikes Sales $ 922,000 $ 269,000 $ 403,000 $ 250,000 Variable manufacturing and selling expenses 477,000 110,000 209,000 158,000 Contribution margin 445,000 159,000 194,000 92,000 Fixed expenses: Advertising, traceable 69,800 9,000 40,400 20,400 Depreciation of special equipment 43,400 20,500 7,500 15,400 Salaries of product-line managers 115,800 40,700 38,400 36,700 Allocated common fixed expenses* 184,400 53,800 80,600 50,000 Total fixed expenses 413,400 124,000 166,900 122,500 Net operating income (loss) $ 31,600 $ 35,000 $ 27,100 $ (30,500) *Allocated on the basis of sales dollars. Management is…
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 $ 926,000 $ 269,000 $ 405,000 $ 252,000 Variable manufacturing and selling expenses 468,000 111,000 206,000 151,000 Contribution margin 458,000 158,000 199,000 101,000 Fixed expenses: Advertising, traceable 69,800 8,800 40,700 20,300 Depreciation of special equipment 43,700 20,400 7,400 15,900 Salaries of product-line managers 114,200 40,700 38,400 35,100 Allocated common fixed expenses* 185,200 53,800 81,000 50,400 Total fixed expenses 412,900 123,700 167,500 121,700 Net operating income (loss) $ 45,100 $ 34,300 $ 31,500 $ (20,700) *Allocated on the basis of sales dollars. Management is considering discontinuing the racing bikes. The special equipment used to produce racing bikes has no resale value and does not wear out. Required:…
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 DirtBikes Mountain Bikes RacingBikes Sales $ 928,000 $ 265,000 $ 403,000 $ 260,000 Variable manufacturing and selling expenses 460,000 112,000 197,000 151,000 Contribution margin 468,000 153,000 206,000 109,000 Fixed expenses: Advertising, traceable 70,000 8,800 40,300 20,900 Depreciation of special equipment 43,600 20,800 7,600 15,200 Salaries of product-line managers 115,900 40,900 38,900 36,100 Allocated common fixed expenses* 185,600 53,000 80,600 52,000 Total fixed expenses 415,100 123,500 167,400 124,200 Net operating income (loss) $ 52,900 $ 29,500 $ 38,600 $ (15,200) *Allocated on the basis of sales dollars. Management is…
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 DirtBikes Mountain Bikes RacingBikes Sales $ 924,000 $ 268,000 $ 400,000 $ 256,000 Variable manufacturing and selling expenses 464,000 116,000 195,000 153,000 Contribution margin 460,000 152,000 205,000 103,000 Fixed expenses: Advertising, traceable 68,800 8,200 40,500 20,100 Depreciation of special equipment 43,000 20,300 7,300 15,400 Salaries of product-line managers 115,000 40,100 38,700 36,200 Allocated common fixed expenses* 184,800 53,600 80,000 51,200 Total fixed expenses 411,600 122,200 166,500 122,900 Net operating income (loss) $ 48,400 $ 29,800 $ 38,500 $ (19,900)…
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 $ 929,000 $ 269,000 $ 407,000 $ 253,000 Variable manufacturing and selling expenses 468,000 115,000 196,000 157,000 Contribution margin 461,000 154,000 211,000 96,000 Fixed expenses: Advertising, traceable 70,200 9,000 40,500 20,700 Depreciation of special equipment 43,500 20,500 7,300 15,700 Salaries of product-line managers 114,500 40,200 38,400 35,900 Allocated common fixed expenses* 185,800 53,800 81,400 50,600 Total fixed expenses 414,000 123,500 167,600 122,900 Net operating income (loss) $ 47,000 $ 30,500 $ 43,400 $ (26,900) *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 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 Bikes Racing Bikes Total Bikes $ 923, e00 $263,000 $ 467, e00 456, e00 Sales 409, 090 $ 251,880 197,000 212,000 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 115,000 148,000 155,000 96,000 69, 300 42, 700 114, 600 184, 600 411, 200 $ 44,800 $ 26, 300 $ 8,500 20,300 40, 300 52,600 121,700 40,200 7,200 38,500 81,800 167,700 20, 600 15,200 35,800 50, 200 121, 800 44,300 $(25, 808) Net operating income (loss) *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…
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. Dire Bikes Bikes $ 921, 000 s265,0 s 404,000 S 252,000 Hountain Racing Bikes Total sales variable manufacturing and selling expenses 447,000 150,e0 16,0 contribution nargin Fixed expenses: Advertising, traceable Depreciation of special equipnent salaries of product-1ine managers Allocated comnon fixed expenses Total fixed exxpenses 101,000 8,900 44,00e 20,see 114,300 40,100 184, 200 53,800 412,Gee 1 00 40,400 7,500 38,100 se, see 166,s00 122,600 24,400 $ 26,100 S 29,200 $(21,600) 20,00 16,00e 35,400 50,400 70,100 Net operating 1ncone (loss) "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…
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 Racing Bikes $ 60,000 33,000 27,000 Total Dirt Bikes Bikes Sales $ 300,000 120,000 180,000 $ 90,000 27,000 63,000 $ 150,000 60,000 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 90,000 10,000 6,000 12,000 18,000 14,000 9,000 13,000 30,000 66,000 6,000 8,000 10,000 12,000 36,000 30,000 23,000 35,000 60,000 148,000 46,000 Net operating income (loss) $ 32,000 $ 17,000 $ 24,000 $ (9,000) *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…
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: Sales Variable manufacturing and selling expenses Contribution margin Total $ 922,000 466,000 456,000 Dirt Bikes $ 269,000 116,000 153,000 70,300 43,500 114,700 184,400 412,900 $ 43,100 Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses Net operating income (loss) "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. 8,400 20,200 Complete this question by entering your answers in the tabs below. Mountain Bikes $ 402,000 192,000 210,000 40, 100 53,800 122,500 $ 30,500 Racing Bikes…
Royal Lawncare Company produces and sells two packaged products-Weedban and Greengrow. Revenue and cost information relating to the products follow: Broduct Weedban Greengrow $ 34.00 $ 13.00 $ 41,000 %24 9.00 Selling price per unit Variable expenses per unit Traceable fixed expenses per year $ 2.70 $ 131,000 Common fixed expenses in the company total $106,000 annually. Last year the company produced and sold 44,000 units of Weedban and 22,000 units of Greengrow. Required: Prepare a contribution format income statement segmented by product lines. Product Line Total Weedban Greengrow Company