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 Dirt Bikes $ 920,000 481,000 439,000 $ 266,000 119,000 147,000 Mountain Bikes $ 402,000 207,000 Racing Bikes $ 252,000 155,000 195,000 97,000 69,900 9,000 40,700 20,200 44,200 20,900 7,800 15,500 115,300 40,900 38,800 35,600 184,000 53,200 80,400 50,400 413,400 124,000 167,700 121,700 $ 25,600 $ 23,000 $ 27,300 $ (24,700) 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.