i. The Ben 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 $ 251,000 917,000 262,000 404,000 Variable manufacturing and selling 455,000 114,000 191,000 150,000 expenses Contribution margin 462,000 148,000 213,000 101,000 Fixed expenses: Advertising, traceable 69,700 8,600 40,700 20,400 Depreciation of special equipment 44,300 20,600 7,800 15,900 Salaries of product-line managers 116,400 40,900 38,900 36,600 Allocated common fixed expenses* 183,400 52,400 80,800 50,200 Total fixed expenses 413,800 122,500 168,200 123,100 $ $ $ $ Net operating income (loss) 48,200 25,500 44,800 (22,100) *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 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 OR (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. Total $ Revenues 925,000 Variable expenses 472,000 Contribution margin 453,000 ii. Chi County Senior Services is a nonprofit organization devoted to providing essential services to seniors who live in their own homes within the Chi County area. Three services are provided for seniors-home nursing, Meals On Wheels, and housekeeping. Data on revenue and expenses for the past year follow: Home Nursing $ 267,000 117,000 150,000 Meals On Wheels $ 407,000 House- keeping $ 251,000 153,000 202,000 205,000 98,000 69,200 8,700 40,200 20,300 43,200 20,600 7,300 15,300 113,700 40,100 38,400 35,200 185,000 53,400 81,400 50,200 411,100 122,800 167,300 121,000 $ 41,900 $ 27,200 $ 37,700 $ (23,000) Fixed expenses: Depreciation Liability insurance. Program administrators' salaries General administrative overhead Total fixed expenses Net operating income (loss) *Allocated on the basis of program revenues. The head administrator of Chi County Senior Services, Judith Miyama, considers last year's net operating income of $41,900 to be unsatisfactory; therefore, she is considering the possibility of discontinuing the housekeeping program. The depreciation in housekeeping is for a small van that is used to carry the housekeepers and their equipment from job to job. If the program were discontinued, the van would be donated to a charitable organization. None of the general administrative overhead would be avoided if the housekeeping program were dropped, but the liability insurance and the salary of the program administrator would be avoided. Required: 1-a. What is the financial advantage or (disadvantage) of discontinuing the housekeeping program? 1-b. Based on the financial advantage or (disadvantage) of discontinuing the housekeeping program calculated in requirement Req 1A, should the Housekeeping program be discontinued? 2-a. Prepare a properly formatted segmented income statement. 2-b. Would a segmented income statement format be more useful to management in assessing the long-run financial viability of the various services?