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	$	921,000		$	264,000		$	405,000		$	252,000
Variable manufacturing and selling expenses		464,000			120,000			191,000			153,000
Contribution margin		457,000			144,000			214,000			99,000
Fixed expenses:
Advertising, traceable		69,700			8,900			40,100			20,700
Depreciation of special equipment		44,200			20,600			7,800			15,800
Salaries of product-line managers		114,300			40,300			38,200			35,800
Allocated common fixed expenses*		184,200			52,800			81,000			50,400
Total fixed expenses		412,400			122,600			167,100			122,700
Net operating income (loss)	$	44,600		$	21,400		$	46,900		$	(23,700)

*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.

Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? Required 1 Required 2 > Financial (disadvantage) per quarter Financial advantage per quarter |Should the production and sale of racing bikes be discontinued? OYes ONo 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 Traceable fixed expenses: Total traceable fixed expenses 0 C Product line segment margin (loss) 0 0 Net operating income (loss) S