CHECK 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: 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) Dirt Mountain Racing Total Bikes Bikes Bikes $924,000 $261,000 $403,000 $ 260,000 469,000 113,000 205,000 151,000 455,000 148,000 198,000 109,000 69,200 8,300 40,200 20,700 43,000 20, 100 7,400 15,500 114,500 40,500 38,200 35,800 184,800 52,200 80, 600 52,000 411,500 121, 100 166,400 124.000 $ 43,500 $ 26,900 $ 31,600 $(15,000) "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