1 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: Dirt Mountain Racing Total Bikes Bikes Bikes $928,000 $262,000 $ 408,000 $ 258,000 470,000 116,000 201,000 153,000 458,000 146,000 207,000 105,000 10 points Skipped Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* Total fixed expenses Net operating income (loss) 69,200 8,200 40,400 20,600 43,600 20,700 7,600 15,300 115,300 40,200 38,600 36,500 185,600 52,400 81,600 51,600 413,700 121,500 168,200 124,000 $ 44,300 $ 24,500 $ 38,800 $(19,000) eBook Print *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. References 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