Question 1. 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 Total Dirt Bikes Mountain Bikes Racing Bikes $300,000 $90,000 $150,000 $60,000 and selling expenses Contribution margin 120,000 27,000 60,000 33,000 180,000 63,000 90,000 27,000 Fixed expenses: Advertising, traceable 30,000 10,000 14,000 6,000 Depreciation of special equipment 23,000 6,000 9,000 8,000 Salaries of product-line managers 35,000 12,000 13,000 10,000 Allocated common fixed expenses 60,000 18,000 30,000 12,000 Total fixed expenses 148,000 46,000 66,000 36,000 Net operating income (loss) *Allocated on the basis of sales dollars. $ 32,000 $17,000 $24,000 $ (9,000) 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. 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.