Question and information are given in the pictures below:
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 Sales $ 929, 000 $266, 000 $ 407,000 $ 256,000 Variable manufacturing and selling 474, 090 120, 000 198,090 156,000 Contribution margin 455,000 146,000 209, 000 100, 000 Fixed expenses; Advertising, traceable 70, 800 8, 800 41, 000 21,000 Depreciation of special equipment 43, 900 20, 600 7, 900 15, 400 Salaries of product-line managers 115, 300 40, 000 38 , 800 36,500 Allocated common fixed expenses* 185, 800 53, 200 81, 400 51,200 Total fixed expenses 415, 800 122, 600 169, 100 124, 100 Net operating income (loss) $ 39,200 $ 23, 400 $ 39,900 $ (24, 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 (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 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 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. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) Required 1 Required 2 Required 3 Should the production and sal Required 3 Jbikes be discontinued? Yes ONO