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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
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) "Allocated on the basis of sales dollars. Total $ 917,000 478,000 Dirt Bikes $ 265,000 112,000 Mountain Bikes $ 400,000 Racing Bikes $ 252,000 207,000 159,000 439,000 153,000 193,000 93,000 68,800 8,200 40,300 20,300 43,200 20,200 7,500 15,500. 114,600 40,500 38,900 35,200 183,400 53,000 80,000 50,400 410,000 121,900 166,700 121,400 $ 29,000 $ 31,100 $ 26,300 $ (28,400) 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 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes
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