The Regal Cycle Company manufactures three types of bicycles$-$a dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: $[[,,,$Mountain,$],[,$Total,Dirt Bikes,Bikes,Racing Bikes$],[$Sales$,928,000,267,000,401,000,260,000*$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:

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.

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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.