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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) Total $ 928,000 474,000 454,000 61,300 44,100 115,500 185,600 414,500 $ 39,500 Dirt Bikes $ 269,000 117,000 152,000 Mountain Bikes $ 403,000 203,000 200,000 8,600 40,500 20,800 7,500 40,700 38,200 53,800 80,600 123,900 166,800 $ 28,100 $ 33,200 Racing Bikes $ 256,000 154,000 102,000 20,200 15,800 36,600 51,200 123,800 $ (21,800)

\begin{tabular}{|c|c|c|c|c|c|} \hline & & Total. & Dirt Bikes & \begin{tabular}{c} Mountain \\ Bikes \end{tabular} & Racing Bikes \\ \hline Sales & $ & 928,000 & $269,000 & $403,000 & $256,000 \\ \hline Variable manufacturing and selling expenses & & 474,000 & 117,000 & 203,000 & 154,000 \\ \hline Contribution margin & & 454,000 & 152,000 & 200,000 & 102,000 \\ \hline Fixed expenses: & & & & & \\ \hline Advertising, traceable & & 62,300 & 8,600 & 40,500 & 20,200 \\ \hline Depreciation of special equipment & & 44,100 & 20,800 & 7,500 & 15,800 \\ \hline Salaries of product-1ine managers & & 115,500 & 40,700 & 38,200 & 36,600 \\ \hline Allocated common fixed expensest & & 185,600 & 53,800 & 80,600 & 51,200 \\ \hline Total fixed expenses & & 414.500 & 123,900 & 166,800 & 123,800 \\ \hline Net operating income (20as) & & $39,500 & $28,100 & $33,200 & $(21,800) \\ \hline \end{tabular} 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

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