pter 11 The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales a expenses for the past quarter follow: Total $ 925,000 466,000 459,000 Dirt Bikes $ 267,000 111,000 156,000 Mountain Bikes $ 406,000 196,000 210,000 Racing Bikes $ 252,000 159,000 93,000 Sales Variable manufacturing and selling expenses contribution margin Pixed expenses Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Not operating income (105) 69,900 43,500 114,600 185,000 413,000 $ 46,000 8,700 20,800 40,200 53,400 123, 100 $ 32,900 40,600 7,300 38,000 81,200 167,100 $ 42,900 20,600 15,400 36,400 50,400 122,800 $ (29,800) *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 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- profitability of the various product lines