Problem 1 with 3 subparts.

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 $ 932,000 $263,000 $ 409,000 $ 260,000 461,000 112,000 195,000 154,000 471,000 151,000 214,000 106,000 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 8,500 40,900 20,800 42,900 20,600 7,100 15,200 115,200 40,300 38,500 36,400 186,400 52,600 81,800 52,000 414,700 122,000 168,300 124,400 $ 56,300 $ 29,000 $ 45,700 $(18,400) *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