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 follows:

TOTAL DIRT BIKE MOUNTAIN BIKE RACING BIKE

SALES 300,000 90,000 150,000 60,000

variable manufacturing 120,000 27,000 60,000 33,000

and selling expenses

contribution margin 180,000 63,000 90,000 27,000

fixed expenses

advertising, traceable 30,000 10,000 14,000 6,000

depreciation of special

equipment 23,000 6,000 9,000 8,000

salaries of product line

managers 35,000 12,000 13,000 10,000

allocated common fixed expenses 60,000 18,000 30,000 12,000

total fixed expenses 148,000 46,000 66,000 36,000

net operating income (loss) 32,000 17,000 24,000 (9,000)

Management i concerned about the losses shown by the racing bikes and wants a recommendation a to whether or not the line should be discontinued. the special equipment use to produce racing bikes has no resale value and does not wear out.

required

should production and sale of the racing bikes be discontinued? explain. show computations to support answer

recast the above data in a format that would be more useable to management in assessing the long-run profitability of the various product line