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) Total Dirt Mountain Racing Bikes Bikes Bikes $914,000 $261,000 $400,000 $ 253,000 477,000 116,000 206,000 155,000 437,000 145,000 194,000 98,000 69,600 44,400 20,900 8,700 40,700 20,200 7,800 15,700 115,400 40,900 38,300 36,200 182,800 412,200 52,200 122,700 80,000 50,600 166,800 122,700 $ 24,800 $ 22,300 $ 27,200 $(24,700) *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. 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? < Prev 1 of 3 Next >