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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: Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating income (loss) Dirt Mountain Racing Total Bikes Bikes Bikes $923,000 $263,000 $483,000 $ 257,000 477,000 116,000 210,000 151,000 446,000 147,080 193,000 186,000 70,000 8,500 40,890 20,700 44,400 20,900 7,700 15,800 114,500 40,300 38,000 36,200 184,600 52,600 80,600 51,400 413,500 122,300 167, 100 124, 100 $ 32,500 $ 24,780 $ 25,900 $(18,180) "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. Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? Financial (disadvantage) per quarter Totals Dirt Bikes Mountain Bikes Racing Bikes Sales Variable manufacturing and selling expenses Contribution margin (loss) Traceable fixed expenses: 0 0 0 0 0 0 0 0 Total traceable fixed expenses Product line segment margin (loss) 0 0 0 0 Net operating income (loss) $ 0

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