Financial advantage (disadvantage) per quarter
Mountain Bikes Racing Bikes Total
Sales $150,000 $60,000 $300,000
Variable manufacturing and selling expenses 60,000 33,000 120,000
Contribution margin $90,000 $27,000 $180,000
Fixed expenses:
Advertising, traceable $30,000 $10,000 $14,000 $6,000
Depreciation of special equipment $23,000 $6,000 $9,000 $8,000
Salaries of product-line managers $35,000 $12,000 $13,000 $10,000
Allocated common fixed expenses* $60,000 $18,000 $30,000 $12,000
Total fixed expenses $148,000 $46,000 $66,000 $36,000
Net operating income (loss) $32,000 $17,000 $24,000 $(9,000)
Financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes: $24,000
Should the production and sale of racing bikes be discontinued?
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.