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	$ 932,000	$ 269,000	$ 408,000	$ 255,000
Variable manufacturing and selling expenses	483,000	117,000	209,000	157,000
Contribution margin	449,000	152,000	199,000	98,000
Fixed expenses:
Advertising, traceable	69,700	8,400	40,700	20,600
Depreciation of special equipment	43,600	20,700	7,200	15,700
Salaries of product-line managers	114,300	40,400	38,800	35,100
Allocated common fixed expenses*Footnote asterisk	186,400	53,800	81,600	51,000
Total fixed expenses	414,000	123,300	168,300	122,400
Net operating income (loss)	$ 35,000	$ 28,700	$ 30,700	$ (24,400)

*Footnote asteriskAllocated 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.

What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?

Should the production and sale of racing bikes be discontinued?

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.

	Totals	Dirt Bikes	Mountain Bikes	Racing Bikes
Contribution margin (loss)
Traceable fixed expenses:
Total traceable fixed expenses
Product line segment margin (loss)
Net operating income (loss)