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:

*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 $926,000 $264,000 408,000 254,000 Total Bikes Bikes Sales Variable manufacturing and selling 473,000 112,000 207,000 154,000 expenses Contribution margin Fixed expenses: 453,000 152,000 201,000 100,000 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 20,200 15,200 36,600 50,800 122,800 $ 38,500 29,100 32,200 (22,800) 69,700 40,600 7,600 39,000 81,600 414,500 122,900 168,800 8,900 20,700 116,100 40,500 52,800 43,500 185,200 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 2Required3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes