The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow:

	Total			Dirt Bikes			Mountain Bikes			Racing Bikes
Sales	$	924,000		$	269,000		$	404,000		$	251,000
Variable manufacturing and selling expenses		463,000			113,000			192,000			158,000
Contribution margin		461,000			156,000			212,000			93,000
Fixed expenses:
Advertising, traceable		69,100			8,200			40,600			20,300
Depreciation of special equipment		43,400			20,300			7,700			15,400
Salaries of product-line managers		114,800			40,200			38,400			36,200
Allocated common fixed expenses*		184,800			53,800			80,800			50,200
Total fixed expenses		412,100			122,500			167,500			122,100
Net operating income (loss)	$	48,900		$	33,500		$	44,500		$	(29,100)

*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. Reg 1A Reg 1B Reg 2 Reg 3 Reg 4A to 40 Reg 4D Reg 5 Assume that Andretti Company has sufficient capacity to produce 116,200 Daks each year without any increase in fixed manufacturing overhead costs. The company could increase its unit sales by 40% above the present 83,000 units each year if it were willing to increase the fixed selling expenses by $120,000. What is the financial advantage (disadvantage) of investing an additional $120,000 in fixed selling expenses? Show less Req 1A Req 1B > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? Yes No Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 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. Totals Dirt Bikes Mountain Bikes Racing Bikes S 404,000 s 924,000 924,000 0 404,000 0 Sales Variable manufacturing and selling expenses Contribution margin (loss) Traceable fixed expenses Advertising Depreciation of special equipment Salaries of the product line managers Total traceable fixed expenses Product line segment margin (loss) Common fixed expenses Net operating income (loss) 0 0 0 0 924,000 S 0 S 404,000 S 0 S 924,000