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 Balaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating income (loes) "Allocated on the basis of sales dollars. Total Dirt Bikes $300,000 $ 90,000 Mountain. Dixes $150,000 Racing Bikes $60,000 120,000 27,000 60,000 13,000 180,000 63,000 90,000 27,000 30,000 10,000 14,000 6,000 23,000 6,000 9,000 8,000 35,000 12,000 13,000 10,000 60,000 18,000 30,000 12,000 148,000 46,000 66,000 36,000 $ 32,000 $17,000 $24,000 5 (9,000) 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. Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) Totals Dirt Bikes Mountain Bikes Racing Bikes 0 0 0 0 0 0 0 0 0 $ 0 $ 0 $ 0 $ 0