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: Dirt Mountain Racing Total Bikes Bikes Bikes 5922,000 $266,000 $401,000 $ 255,000 460,000 111,000 194,000 155,000 462.000 155.000 207.000 100.000 Sales Variable manufacturing and selling expenses Contribution margin Pixed expenses Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating income (loos) 70,000 8,300 40,900 20,800 43,500 20,200 7,400 15,900 115,600 40.400 38,500 36, 700 184.400 53,200 80.200 52.000 413,500 122.100 167,000 124.400 $ 48,500 $ 32,900 $ 40,000 $(24,400) "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. Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? Required: Required 2 > S The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mount- expenses for the past quarter follow: Dirt Mountain Ra Total Bikes Bikes B $ 922,000 $266,000 $ 401,000 $ 25 460,000 111,000 194,000 15 462,000 155,000 207,000 10 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) 70,000 8,300 40,900 2 43,500 20,200 7,400 1 115,600 40,400 38,500 3 184,400 53,200 80,200 413,500 122, 100 167,000 12 $ 48,500 $ 32,900 $ 40,000 $(24 *Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes an the line should be discontinued. The special equipment used to produce racing bike Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the rac 2. Should the production and sale of racing bikes be discontinued? 3. Prepare a properly formatted segmented income statement that would be more us profitability of the various product lines. 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 ONO 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 lo run profitability of the various product lines. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss)
