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 5933,800 $268,000 $ 409,000 5 756,000 473,000 117.000 204,000 152,000 460,000 151,000 205,000 104,000 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) 69,800 8,600 40,200 21,000 42,900 20,500 7,200 15,200 115.100 40,400 38,300 36,400 186,600 53,600 81,800 51,200 414,400 123, 100 167,500 123,800 $ 45,600 $ 27,900 $37,500 $(19,800) "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 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 by entering your answers in the tabs below. Maquired Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes Required 2 > Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? Ores ONO Required 1 Required 2 Required 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. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (los) Net operating income (loss)
