1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?

2. Should the production and sale of racing bikes be discontinued?

3. Provide a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines.

The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Dirt Mountain Racing Total Bikes Bikes Bikes Sales $920,000 $263,000 $403,000 $ 254,000 variabk manufacwrmg and 477,000 118,000 202,000 157,000 selling expenses Contribution margin 443,000 145,000 201,000 97,000 Fixed expenses: Advertising, traceable 69,900 8,800 40,600 20,500 Deprefnatm\" f Spenal 43,200 20,400 7,400 15,400 equipment salaries f Prd\"Ct'lme 114,700 40,100 38,900 35,700 managers \"but\" "\"\"\" fixed 184,000 52,600 80,600 50,800 expenses* Total fixed expenses 411,800 121,900 167,500 122,400 Net operating income (loss) S 31,200 S 23,100 S 33,500 $(25,400) *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. The special equipment used to produce racing bikes has no resale value and does not wear out. Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued? 3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run protability of the various product lines. Complete this question by entering your answers in the tabs below. Required 1 Required 2 ' Required 3