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 Bikes Total Bikes Bikes Sales Variable manufacturing and selling 925, 000 $267,000 400,000 258,000 158,000 467,000 113,000 196,000 expenses Contribution margin Fixed expenses: 458,000 154,000 204,000 100,000 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 20,800 15,800 36,800 51,600 125,000 $42,900 30,700 37,200 $(25,000) 40,900 7,800 38,100 80,000 415,100 123,300 166,800 9,000 44,100 20,500 115,300 40,400 53,400 70,700 185,000 Total fixed expenses Net operating income (loss) Allocated on the basis of sales dollars Management is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out. Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? 2. Should the production and sale of racing bikes be discontinued? 3. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines Required 1Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? Financial (disadvantage) per quarter$ 26,600 Mountain Bikes Racing Bikes Totals Dirt Bikes Sales Variable manufacturing and selling expenses Contribution margin (loss) Traceable fixed expenses $ 925,000 $ 267,000$ 400,000 $ 258,000 467,000113,000196,000158,000 100,000 458,000 154,000 204,000 70,7009,000 40,900 Advertising Depreciation of special equipment Salaries of the product line managers115,30040,400 20,800 7,800 15,800 8,10036,800 73,400 227,900 84,100 117,200 26,600 44,100 20,500 Total traceable fixed expenses Product line segment margin (loss) Common fixed expenses Net operating income (loss) 230,100 69,900 86,800 185,000 $42,900