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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 $916,000 $262,000 $402,000 $ 252,000 Variable manufacturing and 482,000 116,000 209,000 157,000 selling expenses Contribution margin 434,000 146,000 193,000 95,000 Fixed expenses : Advertising, 69,500 8,800 40,500 20,200 traceable Depreciation of 44,200 special equipment 21,000 7,800 15,400 Salaries of product-line 114,900 40,500 38,400 36,000 managers Allocated common 183,200 fixed expenses* 52,400 80,400 50,400 Total fixed expenses 411,800 122,700 167, 100 122,000 Net operating income $ 22,200 $ 23,300 $ 25,900 $(27,000) (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 2 3

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