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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:

Total Dirt Bikes Mountain Bikes Racing Bikes

Sales $ $925,000$ $ $263,000$ $ $410,000$ $ $252,000$

Variable manufacturing and selling expenses $462,000115,000194,000153,000$

Contribution margin $463,000148,000216,00099,000$

Fixed expenses:

Advertising, traceable $69,9008,50040,60020,800$

Depreciation of special equipment $44,10020,9007,60015,600$

Salaries of product$-$line managers $115,40040,30038,80036,300$

Allocated common fixed expenses$*185,00052,60082,00050,400$

Total fixed expenses $414,400122,300169,000123,100$

Net operating income $($loss$)$ $ $48,600$ $ $25,700$ $ $47,000$ $ $(24,100)$

$*$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.

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

Sales

Variable manufacturing and selling expenses

Contribution margin $($loss$)$

Traceable fixed expenses:

Advertising, traceable

Depreciation of special equipment

Salaries of the product line managers

Total traceable fixed expenses

Product line segment margin $($loss$)$

Common fixed expenses

Net operating income $($loss$)$ $

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