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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

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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 past quarter follow: Dirt Mountain Racing Total Bikes Bikes Bikes Sales $923,000 $267,000 $402,000 $ 254,000 Variable manufacturing and 469,000 118,000 193,000 158,000 selling expenses Contribution margin 454,000 149,000 209,000 96,000 Fixed expenses: Advertising, 69, 300 traceable 8,200 40,400 20,700 Depreciation of 43,000 20,200 7,100 special equipment 15,700 Salaries of product-line 116, 100 40,800 38,700 36,600 managers Allocated common fixed expenses* 184,600 53,400 80,400 50,800 Total fixed expenses 413,000 122,600 166,600 123,800 Net operating income $ 41,000 $ 26,400 $ 42,400 $(27,800) (loss) *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 Required Required 1 2 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Required 1 Required 2 >

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