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 Dir Mountain Racing Bikes TotalBikes Bikes Sales variable manufacturing and selling expenses Contribution margin Fixed expenses: 471,099 129,000 417,000 145-00 207000 5.099 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses 69,2008,1 41,000 20,100 7,4815,306e 114,300 40,600 38,400 35,300 50,200 41e,600122,5e0167,200 12e,9ee $ 36,400 22,500 39,800 (25,900) 43,50020,808 183,60 53,0e 80,400 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 (disadvar 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 Prev |of 7 Next >