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The Regal Cycle Company manufactures three types of bicycles-a dirt blke, a mountain bike, and a racing blke. Data on sales an expenses for the
The Regal Cycle Company manufactures three types of bicycles-a dirt blke, a mountain bike, and a racing blke. Data on sales an 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 shouid 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 properfy formatted segmented income statement that would be more useful to management in assessiftg the fong-run profitability of the various product llnes. Complete this question by entering your answers in the tabs below
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