The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Total Dirt Bikes Mountain Bikes Racing Bikes Sales $ 923,000 $ 262,000 $ 406,000 $ 255,000 Variable manufacturing and selling expenses 485,000 119,000 208,000 158,000 Contribution margin 438,000 143,000 198,000 97,000 Fixed expenses: Advertising, traceable 70,000 9,000 40,400 20,600 Depreciation of special equipment 42,700 20,200 7,3

*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 longrun profitability of the various product lines