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 $ 921,000 $265,000 $ 403,000 $ 253,000 469,000 117,000 201,000 151,000 452,000 148,000 202,000 102,000 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) 70,100 8,900 40,600 20,600 43,600 20,400 7,300 15,900 115,000 40,100 39,000 35,900 184,200 53,000 80,600 50,600 412,900 122,400 167,500 123,000 $ 39,100 $ 25,600 $ 34,500 $ (21,000) *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? Required 1 Required 2 Required 3 --------- - Should the production and sale of racing bikes be discontinued? OYes TO No 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. Totals Dirt Bikes Mountain Bikes Racing Bikes 0 0 0 0 Contribution margin (loss) Traceable fixed expenses: L T | | Total traceable fixed expenses Product line segment margin (loss) 0 0 0 $ $ $ Net operating income (loss)