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 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) *Allocated on the basis of sales dollars. Total Dirt Bikes $ 923,000 479,000 444,000 $ 264,000 117,000 147,000 Mountain Bikes $ 408,000 205,000 203,000 Racing Bikes $ 251,000 157,000 94,000 69,700 8,300 40,500 20,900 43,700 21,000 7,200 15,500 114,400 40,000 38,300 36,100 184,600 52,800 81,600 50,200 412,400 122,100 167,600 122,700 $ 31,600 $ 24,900 $ 35,400 $ (28,700) 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.