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 $ 938,000 Dirt Bikes $ 269,000 Mountain Bikes Racing Bikes $410,000 $ 259,000 487,000 120,000 208,000 159,000 451,000 149,000 202,000 100,000 70,800 8,900 41,000 20,900 44,200 20,500 7,800 15,900 115,200 40,100 38,300 36,800 187,600 53,800 82,000 51,800 417,800 123,300 169,100 125,400 $ 33,200 $ 25,700 $ 32,900 $ (25,400) 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? Prev 1 of 7 Next >