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:

	Total			Dirt Bikes			Mountain Bikes			Racing Bikes
Sales	$	930,000		$	266,000		$	409,000		$	255,000
Variable manufacturing and selling expenses		470,000			118,000			201,000			151,000
Contribution margin		460,000			148,000			208,000			104,000
Fixed expenses:
Advertising, traceable		70,100			8,900			40,300			20,900
Depreciation of special equipment		44,200			20,700			7,500			16,000
Salaries of product-line managers		115,400			40,900			38,800			35,700
Allocated common fixed expenses*		186,000			53,200			81,800			51,000
Total fixed expenses		415,700			123,700			168,400			123,600
Net operating income (loss)	$	44,300		$	24,300		$	39,600		$	(19,600)

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) 0 0 0 0 Traceable fixed expenses: Total traceable fixed expenses 0 0 0 0 Product line segment margin (loss) 0 $0 $0 $0 Net operating income (loss) $0

Answer 1

	Total	Dirt Bikes	Mountain Bikes	Racing Bikes
Sales	$       9,30,000	$       2,66,000	$       4,09,000	$       2,55,000
Variable manufacturing and selling expenses	$       4,70,000	$       1,18,000	$       2,01,000	$       1,51,000
Contribution margin (loss)	$       4,60,000	$       1,48,000	$       2,08,000	$       1,04,000
Traceable Fixed expenses:
Advertising, traceable	$           70,100	$             8,900	$           40,300	$           20,900
Depreciation on special equipment	$           44,200	$           20,700	$             7,500	$           16,000
Salaries of product managers	$       1,15,400	$           40,900	$           38,800	$           35,700
Total traceable fixed expenses	$       2,29,700	$           70,500	$           86,600	$           72,600
Product line segment margin (loss)	$       2,30,300	$           77,500	$       1,21,400	$           31,400
Allocated common fixed expense	$       1,86,000
Net operating income (loss)	$           44,300

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