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:

$*$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:

What is the financial advantage $($disadvantage$)$ per quarter of discontinuing the Racing

Bikes?

Should the production and sale of racing bikes be discontinued?

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.

What is the financial advantage $($disadvantage$)$ per quarter of discontinuing the Racing

Bikes?

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.