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	$	929,000		$	266,000		$	406,000		$	257,000
Variable manufacturing and selling expenses		484,000			116,000			208,000			160,000
Contribution margin		445,000			150,000			198,000			97,000
Fixed expenses:
Advertising, traceable		69,900			8,500			40,500			20,900
Depreciation of special equipment		43,400			20,800			7,200			15,400
Salaries of product-line managers		115,700			40,800			38,900			36,000
Allocated common fixed expenses*		185,800			53,200			81,200			51,400
Total fixed expenses		414,800			123,300			167,800			123,700
Net operating income (loss)	$	30,200		$	26,700		$	30,200		$	(26,700)

*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.

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 Bikes Total Bikes Bikes Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: 929,000 $266,000 406,000 257,000 160,000 97,000 484,000 116,000 445,000 150,000 208,000 198,000 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses 20,900 15,400 36,000 51,400 414,800 123,300167,800 123,700 $30,200 26,700 $ 30,200 (26,700) 69,900 8,500 20,800 115,70040,800 53, 200 40,500 7,200 38,900 81,200 43,400 185,80 Total fixed expenses Net operating income (loss) 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 Required 2Required 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 Contribution margin (loss) Traceable fixed expenses Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss)