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Dirt Mountain Racing Total Bikes Bikes Bikes $927,000 $262,000 $ 405,000 $ 260,000 474,000 113,000 209,000 152,000 453,000 149,000 196,000 108,000 Sales Variable manufacturing and
Dirt Mountain Racing Total Bikes Bikes Bikes $927,000 $262,000 $ 405,000 $ 260,000 474,000 113,000 209,000 152,000 453,000 149,000 196,000 108,000 Sales Variable manufacturing and selling expenses Contribution margin Tixed expenses Advertising, traceable Depreciation of special equipment salaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating income (loss) 69,700 8,300 40,400 21,000 44,500 21,000 7,700 15,800 114,100 40,800 38,000 35,300 185 M400 52,400 81,000 52,000 413,700 122,500 167, 100 124,100 $ 39,300 $ 26,500 $ 28,900 $(16, 100) "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 n 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. Required 1 Required 2 Required 3
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