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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
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 Mountain Bikes $ 404,000 202, 000 202.000 Racing Bikes $ 251.000 160,000 91,000 Dirt Total Bikes Sales $ 924.000 $269.000 Variable manufacturing and selling expenses 477,000 115.000 Contribution aargin 447,000 154.000 Fixed expenses Advertising, traceable 70.100 8.800 Depreciation of special equipment 42,900 20,400 Salaries of product-line managers 114, 400 40.600 Allocated common fixed expenses 184, 800 53.800 Total fixed expenses 412. 200 123.600 Net operating income (loss) $ 34,800 $30,000 40.700 7. 200 38.400 80.800 167, 100 $ 34.900 20.600 15,300 35.400 50.200 121.500 $(30,500) "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 property 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
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