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: Total $ 929,000 477,000 452,000 Dirt Bikes $ 268,000 119,000 149,000 Mountain Bikes $ 409,000 204,000 205,000 Racing Bikes $ 252,000 154,000 98,000 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) 68,900 43,900 114,800 185,800 413,400 $ 38,600 8,400 20,700 40,600 53,600 123,300 $ 25,700 40,300 7,900 38,500 81,800 168,500 $ 36,500 20,200 15,300 35,700 50,400 121,600 $ (23,600) *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 1 Required 2 Required 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. Totals $ 929,000 Mountain Dirt Bikes Bikes $ 268,000 $ 409,000 $ 119,000 204,000 149,000 205,000 Racing Bikes 25,200 X 15,400 X 9,800 477,000 452,000 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) 68,900 43,900 8,400 20,700 40,600 69,700 40,300 7,900 38,500 86.700 15,300 X 35,700 X 71,200 x 114,800 227,600 122,200 224,400 $ 79,300 $ 118,300 $ (112,400) 185,800 38,600