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The Regal Cycle Company manufactures three types of bicycles-a dirt bike a mountain bike, and a racing bike Data an sies and expenses for the
The Regal Cycle Company manufactures three types of bicycles-a dirt bike a mountain bike, and a racing bike Data an sies and expenses for the past quarter follow Dirt Total Bikes $.929.000 $265.000 5.427.5 257.000 111,000 207.000 15. 457,000 150.000 200.000 Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses Advertising, traceable Depreciation of special equipment: Salaries of product line sanagers Allocated common fixed expenses Total fixed expenses Het operating income Class) 69,70 8.700 13.500 20.30 15.900 115.000 41.00 38.1 185,800 53. 51.00 123.0 $ 13,000 31.000 $2.500 (20 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 the line should be discontinued. The special equipment used to produce racing bikes tos no rese value and does notwear 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 een profitability of the various product lines
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