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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

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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 Total Bike Bikes Bikes $ 927,000 $264,000 $410,000 253,000 467,000 114,000 201,000 152,000 460,000 1150,000 209.000 101,000 Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses Ndvertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Not operating income (lona) 69,700 8,400 43,600 21,000 114,100 40,400 185,400 52,800 412,800 122.500 47,200 $ 22.400 40,800 20,500 7,500 15,100 38,500 35,200 82,000 50,600 168.800 121,400 40,200 (20.400) "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

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