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 Total Bikes Bikes Bikes $ 931,000 $268,000 $ 403,000 $ 260,000 467,000 118,000 194,000 155,000 464,000 150,000 209,000 105,000 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) 69,900 8,700 40,500 20,700 43,200 20,300 7,400 15,500 115,400 40,700 38,700 36,000 186,200 53,600 80,600 52,000 414,700 123,300 167,200 124, 200 $ 49,300 $ 26,700 $ 41,800 $(19,200) *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. 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 $ 933,000 $ 471,000 462,000 268,000 112,000 $ 156,000 Mountain Racing Bikes Bikes $ 409,000 X $ 256,000 X 204,000 X 155,000 205,000 101,000 Sales Variable manufacturing and selling expenses Contribution margin (loss) Traceable fixed expenses: Advertising 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) 69,800 X 44,100 X 116,600 230,500 231,500 186,600 44,900 8,600 X 21,000 X 40,800 X 70,400 85,600 40,700 X 8,000 X 38,900 X 87,600 117,400 20,500 X 15,100 X 36,900 X 72,500 28,500 $ $ $ $