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: 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 $ 923,000 464,000 Dirt Bikes $ 262,000 112,000 Mountain Bikes $ 408,000 Racing Bikes $ 253,000 196,000 156,000 459,000 150,000 212,000 97,000 69,600 8,600 40,600 20,400 43,900 20,300 7,800 15,800 114,200 40,900 38,000 35,300 184,600 52,400 81,600 50,600 412,300 122,200 168,000 122,100 $ 46,700 $ 27,800 $ 44,000 $ (25,100) 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. 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: Advertising, traceable 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) Totals Dirt Bikes 923,000 $ 262,000 $ Mountain Bikes Racing Bikes 408,000 $ 464,000 112,000 459,000 150,000 196,000 212,000 253,000 156,000 97,000 0 0 0 0 459,000 $ 150,000 $ 212,000 $ 97,000 $ 459,000