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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 $ 921,000 465,000 456,000 Dirt Bikes $ 264,000 111,000 153,000 Mountain Bikes $ 404,000 198,000 Racing Bikes $ 253,000 156,000 206,000 97,000 69,800 8,300 40,600 20,900 43,700 20,500 7,500 15,700 116,100 40,200 39,000 36,900 184,200 52,800 80,800 50,600 413,800 121,800 167,900 124,100 $ 42,200 $ 31,200 $ 38,100 $ (27,100) 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? < Required 1 Required 2 > Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? Yes ONo < Required 1 Required 3 > Required 1 Required 2 Required 3 Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-ru profitability of the various product lines. Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) Totals Dirt Bikes Mountain Bikes Racing Bikes 0 0 0 0 0 0 0 0 0 $ 0 $ 0 0 $ 0 < Required 2 Required 3

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