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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: 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 $ 930,000 468,000 462,000 $ 265,000 112,000 153,000 Mountain Bikes $ 405,000 198,000 207,000 Racing Bikes $ 260,000 158,000 102,000 69,400 9,000 40,200 20,200 44,300 20,700 7,700 15,900 114,500 40,400 38,400 35,700 186,000 53,000 81,000 52,000 414,200 123,100 167,300 123,800 $ 47,800 $ 29,900 $ 39,700 $ (21,800) 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. Answer is not complete. Complete this question by entering your answers in the tabs below. 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. Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) Totals Dirt Bikes Mountain Bikes Racing Bikes < Required 2 0 0 0 0 0 0 0 0 0 $ 0 $ 0 $ 0 0 Required 3 >

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