166 2 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. points Sales Sipped Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers ebook Hint Total fixed expenses Ask Pont Allocated common fixed expenses Net operating income (loss) "Allocated on the basis of sales dollars. References Mc Total Dirt Bikes Mountain Bikes $920,000 $ 266,000 $ 401,000 Racing Bikes $253,000 473,000 116,000 447,000 150,000 203,000 198,000 154,000 99,000 69,700 8,500 40,600 20,600 43,300 20,500 7,500 15,300 114,400 40,600 38,300 35,500 184,000 53,200 80,200 50,600 411,400 122,800 166,600 122,000 $ 35,600 $27,200 $31,400 $ (23,000) 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. 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 profitability of the various product lines. Complete this question by entering your answers in the tabs below.