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	$	933,000		$	268,000		$	410,000		$	255,000
Variable manufacturing and selling expenses		462,000			116,000			195,000			151,000
Contribution margin		471,000			152,000			215,000			104,000
Fixed expenses:
Advertising, traceable		69,400			8,200			40,400			20,800
Depreciation of special equipment		43,500			20,500			7,800			15,200
Salaries of product-line managers		115,600			40,200			38,900			36,500
Allocated common fixed expenses*		186,600			53,600			82,000			51,000
Total fixed expenses		415,100			122,500			169,100			123,500
Net operating income (loss)	$	55,900		$	29,500		$	45,900		$	(19,500)

*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.

Check my work 19 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: 7 points Dirt Mountain Racing Total Bikes Bikes Bikes $ 933,000 $268,000 $410,000 $ 255,000 462,000 116,000 195,000 151,000 471,000 152,000 215,000 104,000 Skipped eBook 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) Hint 69,400 8, 200 40, 400 20,800 43,500 20,500 7,800 15,200 115,600 40,200 38,900 36,500 186,600 53,600 82,000 51,000 415,100 122,500 169, 100 123,500 $ 55,900 $ 29,500 $ 45,900 $(19,500) Print References "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 Mc Graw Hill