Question 37: The Regal Cycle Company manufactures three types of bicycles - a dirt bike, a quarter mountain bike, and a racing bike. Data on sales and expenses for the past follow: Dirt Mountain Racing Total Bikes Bikes Bikes $300,000 $90,000 $150,000 $60,000 120,000 180,000 63,000 90,000 27,000 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) 33,000 60,000 27,000 14,000 6,000 9,000 8,000 13,000 10,000 60,000 18,000 30,000 12.000 66,000 36,000 24,000 $(9,000) 30,000 10,000 23,000 6,000 35,000 12,000 148,00046,000 s 32,000 $ 17,000 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: I. Should production and sale of the racing bikes be discontinued? Explain. Show computations to support your answer 2. Recast the above data in a format that would be more usable to management in assessing the long-run profitability of the various product lines