451,000 $ 266,000 110,000 156,000 Dirt Bikes Mountain Bikes $ 408,000 209,000 Racing Bikes $ 255,000 159,000 199,000 96,000 69,400 8,600 40,300 20,500 43,800 20,600 7,300 15,900 115,500 40,100 38,700 36,700 185,800 53,200 81,600 51,000 414,500 122,500 167,900 124,100 $ 36,500 $ 33,500 $ 31,100 $ (28,100) 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) Total $ 929,000 478,000 "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. 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.