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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	$	921,000		$	263,000		$	401,000		$	257,000
Variable manufacturing and selling expenses		477,000			112,000			207,000			158,000
Contribution margin		444,000			151,000			194,000			99,000
Fixed expenses:
Advertising, traceable		70,500			8,900			40,600			21,000
Depreciation of special equipment		44,100			20,900			7,200			16,000
Salaries of product-line managers		115,700			40,100			38,700			36,900
Allocated common fixed expenses*		184,200			52,600			80,200			51,400
Total fixed expenses		414,500			122,500			166,700			125,300
Net operating income (loss)	$	29,500		$	28,500		$	27,300		$	(26,300)

*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.

3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the lor profitability of the various product lines. Complete this question by entering your answers in the tabs below. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the longrun profitability of the various product lines

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