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	$	927,000		$	266,000		$	409,000		$	252,000
Variable manufacturing and selling expenses		471,000			111,000			202,000			158,000
Contribution margin		456,000			155,000			207,000			94,000
Fixed expenses:
Advertising, traceable		70,200			8,900			40,800			20,500
Depreciation of special equipment		44,100			20,600			8,000			15,500
Salaries of product-line managers		114,600			40,400			38,400			35,800
Allocated common fixed expenses*		185,400			53,200			81,800			50,400
Total fixed expenses		414,300			123,100			169,000			122,200
Net operating income (loss)	$	41,700		$	31,900		$	38,000		$	(28,200)

*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.

	Totals	Dirt Bikes	Mountain Bikes	Racing Bikes
Contribution margin (loss)	0	0	0	0
Traceable fixed expenses:
Total traceable fixed expenses	0	0	0	0
Product line segment margin (loss)	0	$0	$0	$0
Net operating income (loss)	$0