Should the production and sale of racing bikes be discontinued?

	Yesradio button unchecked1 of 2 Noradio button unchecked2 of 2

• repare 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)

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 $ 922,000 $264,000 $ 406,000 $ 252,000 487,000 118,000 210,000 159,000 435,000 146,000 196,000 93,000 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) 70,500 8,800 44,400 20,700 114,500 40.900 184,400 52,800 413,800 123,200 21,200 $ 22,800 $ 40,700 21,000 7,800 15,900 38,300 35,300 81,200 168,000 122,600 28,000 $(29,600) $ *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