The Regal Cycle Company manufactures three types of bicycles: a dirt bike, a mountain bike, and a racing bike.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. **Sales and Expense Report**This table presents a breakdown of sales, variable expenses, fixed expenses, and net operating income for three types of bikes: Dirt Bikes, Mountain Bikes, and Racing Bikes. The figures are divided into several categories with a total column for all products.### Sales and Expenses:- **Sales**: - Total: $924,000 - Dirt Bikes: $266,000 - Mountain Bikes: $408,000 - Racing Bikes: $250,000- **Variable Manufacturing and Selling Expenses**: - Total: $475,000 - Dirt Bikes: $112,000 - Mountain Bikes: $210,000 - Racing Bikes: $153,000- **Contribution Margin**: - Total: $449,000 - Dirt Bikes: $154,000 - Mountain Bikes: $198,000 - Racing Bikes: $97,000### Fixed Expenses:- **Advertising, Traceable**: - Total: $69,000 - Dirt Bikes: $8,200 - Mountain Bikes: $40,400 - Racing Bikes: $20,400- **Depreciation of Special Equipment**: - Total: $43,200 - Dirt Bikes: $20,300 - Mountain Bikes: $7,200 - Racing Bikes: $15,700- **Salaries of Product-Line Managers**: - Total: $115,800 - Dirt Bikes: $40,800 - Mountain Bikes: $38,100 - Racing Bikes: $36,900- **Allocated Common Fixed Expenses**: - Total: $184,800 - Dirt Bikes: $53,200 - Mountain Bikes: $81,600 - Racing Bikes: $50,000- **Total Fixed Expenses**: - Total: $412,800 - Dirt Bikes: $122,500 - Mountain Bikes: $167,300 - Racing Bikes: $123,000### Net Operating Income (Loss):- **Total**: $36,200- **Dirt Bikes**: $31,500- **Mountain Bikes**: $30,700- **Racing Bikes**: ($26,000) ### Financial Analysis Template for Bike Product Lines**Overview**This table illustrates a financial breakdown of three different bike product lines: Dirt Bikes, Mountain Bikes, and Racing Bikes. The categories included in the analysis are Sales, Variable Manufacturing and Selling Expenses, Contribution Margin, Traceable Fixed Expenses, Product Line Segment Margin, Common Fixed Expenses, and Net Operating Income.**Table Breakdown:**1. **Sales**: - Records the total sales revenue for each bike category. 2. **Variable Manufacturing and Selling Expenses**: - Represents the costs that change depending on the production volume.3. **Contribution Margin (Loss)**: - Calculated as Sales minus Variable Expenses. This figure shows the amount contributing to fixed expenses and profit.4. **Traceable Fixed Expenses**: - **Advertising, traceable**: Expenses directly related to promoting each product line. - **Depreciation of special equipment**: Costs associated with the reduction in value of equipment specific to each product line. - **Salaries of the product line managers**: Fixed salaries for managers dedicated to a specific bike category.5. **Total Traceable Fixed Expenses**: - The sum of all traceable fixed costs.6. **Product Line Segment Margin (Loss)**: - Calculated as Contribution Margin minus Total Traceable Fixed Expenses. Represents the segment's profitability before common fixed expenses.7. **Common Fixed Expenses**: - Costs shared across all product lines.8. **Net Operating Income (Loss)**: - The final profit or loss after subtracting common fixed expenses from the product line segment margin.Each bike category delineates zeros across all financial metrics, indicating this template is prepared for data input and does not currently display actual financial figures.

Income statement: Under this Statement showing the company’s performance over a period of time by subtracting expenses from revenue to obtain the net income. Sometimes it is known as a profit & loss statement or earning report.Particular Total Continue Racing bikes Amount ($) Total Discontinue with racing bike Amount ($) Difference between Continue and discontinue of racing bike Amount ($) Sales 924,000 674,000 (250,000) Less: Variable expenses 475,000 322,000 153,000 Contribution margin 449,000 352,000 (97,000) Fixed expenses: Advertising, traceable 69,000 48,600 20,400 Depreciation on special equipment 43,200 43,200 Nil Salaries of the product line manager 115,800 78,900 36,900 Allocated to common fixed expenses 184,800 184,800 Nil Total Fixed expenses 412,800 355,500 57,300 Financial (Disadvantage) Per quarter 36,200 (3,500) (39,700)Financial (Disadvantage) Per quarter = (39,700)When the production and sale of racing bikes be discontinued then the burden of loss is increased and for that reason, a business should not run a long time of period. So Therefore Discontinue decision should not be given acceptance.Particular Total Amount ($) Dirt Bikes Amount ($) Mountain bikes Amount ($) Racing Bikes Amount ($) Sales 924,000 266,000 408,000 250,000 Less: Variable manufacturing and selling expenses (475,000) (112,000) (210,000) (153,000) Contribution margin 449,000 154,000 198,000 97,000 Advertising traceable 69,000 8,200 40,400 20,400 Depreciation on equipment 43,200 20,300 7,200 15,700 Salaries of product line manager 115,800 40,800 38,100 36,900 Total Traceable fixed expenses 228,000 69,300 85,700 73,000 Product line Segment margin (loss) 221,000 84,700 112,300 24,000 Less: Common fixed expenses (184,800) Net operating Income (Loss) 36,200 Net operating Income = $36,200