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 $ 926,000 478,000 $ 268,000 117,000 Mountain Bikes $ 407,000 Racing Bikes $ 251,000 202,000 159,000 448,000 151,000 205,000 92,000 69,600 8,800 40,100 20,700 43,100 20,300 7,300 15,500 116,700 40,900 38,800 37,000 185,200 53,600 81,400 50,200 414,600 123,600 167,600 123,400 $ 33,400 $ 27,400 $ 37,400 $ (31,400) 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.