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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

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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 $933,000 $268,000 $405,000 $ 260,000 480,000 111,000 209,000 160,000 453,000 157,000 196,000 100,000 Bales Variable manufacturing and selling expenses Contribution margin Pixed expenses Advertising, traceable Depreciation of special equipment salaries of produet-line managers Allocated common fixed expenses Total fixed expenses Not operating income (100) 69,700 8,700 40,600 20,400 43,800 20,300 7,600 15,900 115,700 41,000 38,600 36,100 186,600 53,600 81.000 52,000 415,000 123,600 167.000 124,400 $ 37,200 $ 33, 400 $ 20,200 $(24,400) "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 property formatted segmented income statement that would be more useful to management in assessing the long run profitability of the various product lines. 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 0 0 0 0 Contribution margin (loss) Traceable fixed expenses: 0 0 0 0 Total traceable fixed expenses Product line segment margin (loss) 0 S 0 S 0 $ 0 Net operating income (loss) $ 0

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