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he Regal Cycle Company manufactures three types of bicycles a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for

he 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 $ 262,000 $ 407,000 $ 257,000
Variable manufacturing and selling expenses 468,000120,000193,000155,000
Contribution margin 458,000142,000214,000102,000
Fixed expenses:
Advertising, traceable 70,5009,00040,60020,900
Depreciation of special equipment 43,30020,4007,10015,800
Salaries of product-line managers 115,00040,50038,80035,700
Allocated common fixed expenses*185,20052,40081,40051,400
Total fixed expenses 414,000122,300167,900123,800
Net operating income (loss) $ 44,000 $ 19,700 $ 46,100 $ (21,800)
*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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