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	$ 920,000	$ 262,000	$ 408,000	$ 250,000
Variable manufacturing and selling expenses	475,000	112,000	210,000	153,000
Contribution margin	445,000	150,000	198,000	97,000
Fixed expenses:
Advertising, traceable	69,300	8,900	40,200	20,200
Depreciation of special equipment	43,700	20,600	7,400	15,700
Salaries of product-line managers	114,800	40,600	38,300	35,900
Allocated common fixed expenses*	184,000	52,400	81,600	50,000
Total fixed expenses	411,800	122,500	167,500	121,800
Net operating income (loss)	$ 33,200	$ 27,500	$ 30,500	$ (24,800)

*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?

	Yesradio button unchecked1 of 2 Noradio button unchecked2 of 2

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)
Traceable fixed expenses:
Total traceable fixed expenses
Product line segment margin (loss)
Net operating income (loss)