2. The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and...

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2. 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 Racing Bikes Bikes Sales $300,000 $90,000 $150,000 $60,000 Variable manufacturing and selling expenses 120,000 27,000 60,000 33,000 Contribution margin.. 180,000 63,000 90,000 27,000 Fixed expenses: Advertising, traceable. 30,000 10,000 14,000 6,000 Depreciation of special equipment......... 23,000 6,000 9,000 8,000 Salaries of product-line managers 35,000 12,000 13,000 10,000 Allocated common fixed expenses... 60,000 18,000 30,000 12,000 Total fixed expenses.. 148,000 46,000 66,000 36,000 Net operating income (loss). $ 32,000 $17,000 $ 24,000 $ (9,000) *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. a) Should production and sale of the racing bikes be discontinued? Explain. Show computations to support your answer. b) Recast the above data in a format that would be more usable to management in assessing the long-run profitability of the various product lines. 2. 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 Racing Bikes Bikes Sales $300,000 $90,000 $150,000 $60,000 Variable manufacturing and selling expenses 120,000 27,000 60,000 33,000 Contribution margin.. 180,000 63,000 90,000 27,000 Fixed expenses: Advertising, traceable. 30,000 10,000 14,000 6,000 Depreciation of special equipment......... 23,000 6,000 9,000 8,000 Salaries of product-line managers 35,000 12,000 13,000 10,000 Allocated common fixed expenses... 60,000 18,000 30,000 12,000 Total fixed expenses.. 148,000 46,000 66,000 36,000 Net operating income (loss). $ 32,000 $17,000 $ 24,000 $ (9,000) *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. a) Should production and sale of the racing bikes be discontinued? Explain. Show computations to support your answer. b) Recast the above data in a format that would be more usable to management in assessing the long-run profitability of the various product lines.