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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 $922,000 $261,000 $406, 000 $ 255,000 Variable manufacturing and 466,000 118,000 195,000 153,000 selling expenses Contribution margin 456,000 143,000 211,000 102,000 Fixed expenses: Advertising, 70,500 8,800 traceable 40, 700 21,000 Depreciation of 43,600 special equipment 20,400 7,300 15,900 Salaries of product-line 114,200 40,200 38,800 35,200 managers Allocated common 184,400 52,200 81,200 fixed expenses* 51,000 Total fixed expenses 412,700 121,600 168,000 123, 100 Net operating income $ 43,300 $ 21,400 $ 43,000 $(21,100) (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 Required Required 1 2 3 Should the production and sale of racing bikes be discontinued? Yes ONO Required Required Required 1 2 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. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss)

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