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	$ 921,000	$ 265,000	$ 401,000	$ 255,000
Variable manufacturing and selling expenses	460,000	112,000	193,000	155,000
Contribution margin	461,000	153,000	208,000	100,000
Fixed expenses:
Advertising, traceable	69,500	8,100	40,800	20,600
Depreciation of special equipment	43,400	20,300	7,400	15,700
Salaries of product-line managers	115,200	40,900	38,900	35,400
Allocated common fixed expenses*	184,200	53,000	80,200	51,000
Total fixed expenses	412,300	122,300	167,300	122,700
Net operating income (loss)	$ 48,700	$ 30,700	$ 40,700	$ (22,700)

*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.

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: *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. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Should the production and sale of racing bikes be discontinued? Yes 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