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Chapter 11 Homework A Saved Help Save & Exit Submit Check my work 1 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: 1.25 points Dirt Mountain Racing Total Bikes Bikes Bikes $ 919,000 $269,000 $ 400,000 $ 250,000 465,000 118,000 195,000 152,000 454,000 151,000 205,000 98,000 eBook Hint 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) References 68,800 8,100 40,400 20,300 44,000 20,500 7,700 15,800 114,000 40,500 38,300 35,200 183,800 53,800 80,000 50,000 410,600 122,900 166,400 121,300 $ 43,400 $ 28,100 $ 38,600 $(23,300) *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