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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	$ 932,000	$ 270,000	$ 408,000	$ 254,000
Variable manufacturing and selling expenses	482,000	119,000	209,000	154,000
Contribution margin	450,000	151,000	199,000	100,000
Fixed expenses:
Advertising, traceable	70,300	8,800	40,600	20,900
Depreciation of special equipment	43,800	20,700	7,600	15,500
Salaries of product-line managers	114,400	40,700	38,100	35,600
Allocated common fixed expenses*	186,400	54,000	81,600	50,800
Total fixed expenses	414,900	124,200	167,900	122,800
Net operating income (loss)	$ 35,100	$ 26,800	$ 31,100	$ (22,800)

*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.

What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Financial (disadvantage) per quarter Should the production and sale of racing bikes be discontinued? Yes No 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 0 0 0 0 Contribution margin (loss) Traceable fixed expenses: 0 0 0 0 Total traceable fixed expenses Product line segment margin (loss) 0 0 $ 0 $ 0 $ 0 Net operating income (loss) $ 0

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