The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow:

	Total			Dirt Bikes			Mountain Bikes			Racing Bikes
Sales	$	931,000		$	266,000		$	408,000		$	257,000
Variable manufacturing and selling expenses		463,000			115,000			195,000			153,000
Contribution margin		468,000			151,000			213,000			104,000
Fixed expenses:
Advertising, traceable		70,000			8,400			40,700			20,900
Depreciation of special equipment		43,500			20,400			7,200			15,900
Salaries of product-line managers		114,200			40,500			38,300			35,400
Allocated common fixed expenses*		186,200			53,200			81,600			51,400
Total fixed expenses		413,900			122,500			167,800			123,600
Net operating income (loss)	$	54,100		$	28,500		$	45,200		$	(19,600)

*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. 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.

2. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?

Chapter 6 homework practice Saved 1 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 oints 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. 8 01:58:25 Totals Dirt Bikes Mountain Bikes Racing Bikes eBook 0 0 0 0 Hint Sales Contribution margin (loss) Traceable fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of the product line managers Total traceable fixed expenses Product line segment margin (loss) Common fixed expenses Net operating income (loss) Print 0 0 0 0 0 $ 0 $ $ 0 lo References $ 0 Required 2 Required 3 *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? Financial (disadvantage) per quarter $(466,300)