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 Bikes Total Bikes Bikes Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: 927,000 $267,000 $ 402,000 258,000 463,000 111,000 195,900157,000 464,000 156,000 207,000 101,000 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses 8,600 43,300 20,400 114,40040,100 185,400 53,400 412,800 122, 500 40,100 7,200 38,100 80,400 165,800 21,000 15,700 36,200 51,600 124,500 69,700 Total fixed expenses Net operating income (loss) $ 51,200 33,500 $ 41,200 $(23,500) 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 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 Sales Variable manufacturing and selling expenses Contribution margin (loss) Traceable fixed expenses 0 0 0 Salaries of the product line managers Advertising, traceable Depreciation of special equipment Total traceable fixed expenses Product line segment margin (loss) Common fixed expenses Net operating income (loss) 0