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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: Dirt Mountain Racing Total Bikes Bikes Bikes $924,000 $263,000 $404,000 $ 257,000 472,000 111,000 204,000 157,800 452,000 152,000 200,000 100.000 Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating income (loss) 70,400 8.900 40,800 20,700 44,300 20,500 7,900 15,900 115,700 40,600 38,200 36,900 184,800 52,600 80,800 51, 100 415 200 122.600 167, 700 124,900 3 36,800 $ 29,400 $ 32,300 (24,900) "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 profitability of the various product lines 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 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Financial (disadvantage) per quarter RE Required 2 > Required 1 Required 2 Required 3 0 O 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. Totals Dirt Bikes Mountain Bikes Racing Bikes Sales Variable manufacturing and selling expenses Contribution margin (loss) 0 0 Traceable foxed expenses Advertising, traceable Depreciation of special equipment Salaries of the product line managers Total traceable foxed expenses 0 0 0 Product line segment margin (loss) 0 $ S 0 Common fixed expenses Not operating income (loss) $ 0 0 0
