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 $ 300,000 $90,000 $ 150,000 $ 60,000 120,000 180,000 27,000 63,000 60,000 90,000 33,000 27,000 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) 30,000 10,000 14,000 6,000 23,000 6,000 9,000 8,000 35,000 12,000 13,000 10,000 60,000 18,000 30,000 12,000 148,000 46,000 66,000 36,000 $ 32,000 $ 17,000 $ 24,000 $ (9,000) *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. Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Financial (disadvantage) per quarter 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. $ $ | Sales Variable manufacturing and selling expenses Contribution margin (loss) Traceable fixed expenses: Mountain Totals Dirt Bikes Bikes 300,000 $ 90,000 $ 150,000 120,000 27,000 60,000 180,000 63,000 90,000 Racing Bikes 60,000 33,000 27,000 Advertising, traceable 30,000 23,000 35,000 88,000 92,000 10,000 6,000 12,000 28,000 35,000 Depreciation of special equipment Salaries of the product line managers Total traceable fixed expenses Product line segment margin (loss) Common fixed expenses Net operating income (loss) 14,000 9,000 13,000 36,000 54,000 6,000 8,000 10,000 24,000 $ $ $ 3,000 $ 92,000