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	$ 264,000	$ 408,000	$ 257,000
Variable manufacturing and selling expenses	464,000	119,000	193,000	152,000
Contribution margin	465,000	145,000	215,000	105,000
Fixed expenses:
Advertising, traceable	69,300	8,100	40,500	20,700
Depreciation of special equipment	44,200	20,700	7,800	15,700
Salaries of product-line managers	115,800	40,700	38,500	36,600
Allocated common fixed expenses*	185,800	52,800	81,600	51,400
Total fixed expenses	415,100	122,300	168,400	124,400
Net operating income (loss)	$ 49,900	$ 22,700	$ 46,600	$ (19,400)

*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 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: Total $ 929,000 464,000 465,000 Dirt Bikes $ 264,000 119,000 145,000 Mountain Bikes $ 408,000 193,000 215,000 Racing Bikes $ 257,000 152,000 105,000 Sales Variable manufacturing and selling expenses Contribution margin Pixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating income (loss) 69,300 44,200 115,800 185,800 415,100 $ 49,900 8,100 20,700 40,700 52,800 122,300 $ 22,700 40, 500 7,800 38,500 81,600 168,400 $ 46,600 20,700 15,700 36,600 51,400 124,400 $ (19,400) *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 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