Return to question 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 Bikes Total Bikes Bikes Sales Variable manufacturing and selling $934,000 $269,000 406,000 $259,000 472,000 118,000 202,000 152,000 107,000 points expense Contribution margin Fixed expenses: 462,000 151,000204,000 Advertising, traceable Depreciation of special equipment Salaries of product-1ine managers Allocated common fixed expenses* 40,900 7,100 38,500 186,800 53,800 81,200 415,200 122.800 167,700 69,900 8,200 43,100 20,100 40,700 20,800 15,900 36,200 51,800 124,700 36,300 $(17,700) 115,400 Total fixed expenses Net operating income (loss) 46,800 S 28,200 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-rurn profitability of the various product lines