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: 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) Total $930,000 467,000 463,000 69,900 43,900 114,500 186,000 414,300 $ 48,700 Dirt Bikes $ 269,000 117,000 152,000 8,600 20,800 40,400 53,800 123,600 $ 28,400 Mountain Bikes $ 405,000 196,000 209,000 40,500 7,600 Racing Bikes $ 256,000 154,000 102,000 20,800 15,500 .38,100 36,000 51,200 81,000 167,200 123,500 $ 41,800 $ (21,500) *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.

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: "Allocated on the basis of sales dollars. Management is concemed 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 weat out. Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Rading 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