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 $ 407,000 $ 258,000 Variable manufacturing and selling expenses 463,000 116,000 190,000 157,000 Contribution margin 468,000 150,000 217,000 101,000 Fixed expenses: Advertising, traceable 69,900 8,800 40,900 20,200 Depreciation of special equipment 43,900 20,700 7,900 15,300 Salaries of product-line managers 115,700 40,300 39,000 36,400 Allocated common fixed expenses* 186,200 53,200 81,400 51,600 Total fixed expenses 415,700 123,000 169,200 123,500 Net operating income (loss) $ 52,300 $ 27,000 $ 47,800 $ (22,500) *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 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 $ 407,000 $ 258,000 Variable manufacturing and selling expenses 463,000 116,000 190,000 157,000 Contribution margin 468,000 150,000 217,000 101,000 Fixed expenses: Advertising, traceable 69,900 8,800 40,900 20,200 Depreciation of special equipment 43,900 20,700 7,900 15,300 Salaries of product-line managers 115,700 40,300 39,000 36,400 Allocated common fixed expenses* 186,200 53,200 81,400 51,600 Total fixed expenses 415,700 123,000 169,200 123,500 Net operating income (loss) $ 52,300 $ 27,000 $ 47,800 $ (22,500) *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. Garrison 16e Rechecks 2017-11-14