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	$	918,000		$	261,000		$	401,000		$	256,000
Variable manufacturing and selling expenses		467,000			115,000			199,000			153,000
Contribution margin		451,000			146,000			202,000			103,000
Fixed expenses:
Advertising, traceable		69,400			8,200			40,500			20,700
Depreciation of special equipment		42,800			20,200			7,500			15,100
Salaries of product-line managers		114,300			40,300			38,300			35,700
Allocated common fixed expenses*		183,600			52,200			80,200			51,200
Total fixed expenses		410,100			120,900			166,500			122,700
Net operating income (loss)	$	40,900		$	25,100		$	35,500		$	(19,700)

*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 $ 918,000 $261,000 $ 401,000 256,0ee 467,000 115,000199,000 153,000 Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: 451,000 146,000 202,000 103.aga 20,700 15,100 35,700 51,200 166,500 122,700 $40,900 25,100 $ 35,500 $(19,700) Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixe 8,200 42,800 20,200 114, 300 40,38e 183,600 52,200 410,100 120,900 69,400 40,50 7,500 38,300 80,200 expenses* 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 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? inancial (disadvantage) per quarter Required 1 Required 2 Complete this question by entering your answers in the tabs below 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 Contribution margin (loss) Traceable fixed expenses Total traceable fixed expenses Product line segment margin (loss) 0 0 0 Net operating income (loss)