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	$ 925,000	$ 262,000	$ 410,000	$ 253,000
Variable manufacturing and selling expenses	466,000	111,000	195,000	160,000
Contribution margin	459,000	151,000	215,000	93,000
Fixed expenses:
Advertising, traceable	70,000	8,700	40,800	20,500
Depreciation of special equipment	43,700	20,500	7,500	15,700
Salaries of product-line managers	115,200	40,400	38,700	36,100
Allocated common fixed expenses*	185,000	52,400	82,000	50,600
Total fixed expenses	413,900	122,000	169,000	122,900
Net operating income (loss)	$ 45,100	$ 29,000	$ 46,000	$ (29,900)

*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