a.

b.

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: Dirt Mountain Racing Total Bikes Bikes Bikes $ 929,000 $262,000 $ 407,000 $ 260,000 463,000 112,000 197,000 154,000 466,000 150,000 210,000 106,000 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) 70,200 8,600 40,600 21,000 43,800 20,700 7,400 15,700 115,400 40,900 38,000 36,500 185,800 52,400 81,400 52,000 415,200 122,600 167,400 125,200 $ 50,800 $ 27,400 $ 42,600 $(19,200) *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 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? T Required 1 Required 2 Required 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. Totals Dirt Bikes Mountain Bikes Racing Bikes 0 0 0 0 Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses 0 0 0 Oo Product line segment margin (loss) 0 $ 0 $ 0 Net operating income (loss) 0