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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
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 Total $929,000 474.ee 455.ee birt Bikes 5.269.ece 118,00 151,000 Mountain Bikes 5405,eee 280,000 201.ee Racing Bikes 5 255, eee 152.000 1e,eee Sales Variable manufacturing and selling expenses Contribution margin Fred expenses: Advertising, traceable Depreciation of special equipment Salaries of product line managers Allocated common fixed expenses Total fixed expenses met operating income (los) 69,200 43,7ee 115,400 185.00 435.109 $ 19.900 20,300 41.ee 53. Bee 123.400 $ 27,600 40,600 7.800 38.600 31,000 168,000 $ 33.000 20,300 15,600 36,60 51.000 123/200 $ (20.700) "Allocated on the basis of sabes 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-tun profitability of the various product lines
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