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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 Mountain Total Dirt Bikes Bikes Racing Bikes Sales $ 917,000 $ 264,000 $ 402,000 $ 251,000 Variable manufacturing and selling expenses 477,000 119,880 204,000 154,000 Contribution margin 440,000 145,800 198,080 97,080 Fixed expenses: Advertising, traceable 69, 100 8,780 40,200 20,200 Depreciation of special equipment 43,700 20,600 7,400 15,700 Salaries of product-line managers 115,300 40,600 38,400 36,300 Allocated common fixed expenses 183,400 52,800 80,400 50,200 Total fixed expenses 411,500 122,700 166,400 122,400 .Net operating incone (los) $ 28,500 $ 22,300 $ 31,600 5 (25,408) "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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3

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