The Regal Cycle Company manufactures three types of bicycles

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:

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.         Should production and sale of the racing bikes be discontinued? Explain. Show computations to support your answer.

2.         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.

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