Exercise 11-2 (Algo) Dropping or Retaining a Segment [LO11-2] 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:

Total	Dirt Bikes	Mountain Bikes	Racing Bikes
Sales	$ 926,000	$ 269,000	$ 405,000	$ 252,000
Variable manufacturing and selling expenses	471,000	113,000	205,000	153,000
Contribution margin	455,000	156,000	200,000	99,000
Fixed expenses:
Advertising, traceable	70,500	8,900	40,700	20,900
Depreciation of special equipment	43,400	20,400	7,200	15,800
Salaries of product-line managers	114,500	40,100	38,300	36,100
Allocated common fixed expenses*	185,200	53,800	81,000	50,400
Total fixed expenses	413,600	123,200	167,200	123,200
Net operating income (loss)	$ 41,400	$ 32,800	$ 32,800	$ (24,200)

*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.