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 $ 931,000 $ 270,000 $ 401,000 $ 260,000 Variable manufacturing and selling expenses 477,000 117,000 208,000 152,000 Contribution margin 454,000 153,000 193,000 108,000 Fixed expenses: Advertising, traceable 69,500 8,300 40,900 20,300 Depreciation of special equipment 44,100 20,600 7,900 15,600 Salaries of product-line managers 114,800 40,200 38,700 35,900 Allocated common fixed expenses* 186,200 54,000 80,200 52,000 Total fixed expenses 414,600 123,100 167,700 123,800 Net operating income (loss) $ 39,400 $ 29,900 $ 25,300 $ (15,800) *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.

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: Total $ 931,000 477,000 454,000 Dirt Bikes $ 270,000 117,000 153,000 Mountain Bikes $ 401,000 208,000 193,000 Racing Bikes $ 260,000 152,000 108,000 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) 69,500 44,100 114,800 186,200 414,600 $ 39,400 8,300 20,600 40,200 54,000 123,100 $ 29,900 40,900 7,900 38,700 80,200 167,700 $ 25,300 20,300 15,600 35,900 52,000 123,800 $ (15,800) *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