Answer Happy

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:
*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.
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.