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	$	926,000		$	262,000		$	405,000		$	259,000
Variable manufacturing and selling expenses		472,000			114,000			204,000			154,000
Contribution margin		454,000			148,000			201,000			105,000
Fixed expenses:
Advertising, traceable		69,500			8,900			40,400			20,200
Depreciation of special equipment		43,800			21,000			7,700			15,100
Salaries of product-line managers		114,200			40,200			38,800			35,200
Allocated common fixed expenses*		185,200			52,400			81,000			51,800
Total fixed expenses		412,700			122,500			167,900			122,300
Net operating income (loss)	$	41,300		$	25,500		$	33,100		$	(17,300)

*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.

Complete this question by entering your answers in the tabs below. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the longrun profitability of the various product lines