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 $ 928,000 $ 268,000 $ 408,000 $ 252,000 variable manufacturing and selling expenses 471,000 112,000 200,000 159,000 contribution margin 457,000 156,000 208,000 93,000 fixed expenses: advertising, traceable 70,100 8,700 41,000 20,400 depreciation of special equipment 43,800 20,600 7,300 15,900 salaries of product-line managers 114,400 40,700 38,000 35,700 allocated common fixed expenses* 185,600 53,600 81,600 50,400 total fixed expenses 413,900 123,600 167,900 122,400 net operating income (loss) $ 43,100 $ 32,400 $ 40,100 $ (29,400) *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.
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The regal cycle company manufactures three types of bicycles—a dirt bike, a mountain bike, and a rac...
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