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:

	Total	Dirt Bikes	Mountain Bikes	Racing Bikes
Sales	$ 915,000	$ 261,000	$ 402,000	$ 252,000
Variable manufacturing and selling expenses	460,000	110,000	194,000	156,000
Contribution margin	455,000	151,000	208,000	96,000
Fixed expenses:
Advertising, traceable	69,800	8,500	40,700	20,600
Depreciation of special equipment	43,200	20,100	7,500	15,600
Salaries of product-line managers	115,000	40,500	38,000	36,500
Allocated common fixed expenses*	183,000	52,200	80,400	50,400
Total fixed expenses	411,000	121,300	166,600	123,100
Net operating income (loss)	$ 44,000	$ 29,700	$ 41,400	$ (27,100)

*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 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. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 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