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	$	928,000		$	269,000		$	408,000		$	251,000
Variable manufacturing and selling expenses		456,000			110,000			192,000			154,000
Contribution margin		472,000			159,000			216,000			97,000
Fixed expenses:
Advertising, traceable		70,300			8,900			40,600			20,800
Depreciation of special equipment		44,100			20,800			7,700			15,600
Salaries of product-line managers		114,400			40,300			38,100			36,000
Allocated common fixed expenses*		185,600			53,800			81,600			50,200
Total fixed expenses		414,400			123,800			168,000			122,600
Net operating income (loss)	$	57,600		$	35,200		$	48,000		$	(25,600)

*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.

• Required 1

What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? ________

Complete this question by entering your answers in the tabs below.

• Required 2

Should the production and sale of racing bikes be discontinued?

	Yes radio button unchecked is correct answer

Complete this question by entering your answers in the tabs below.

• Required 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
not attempted	not attempted	not attempted	not attempted	not attempted
not attempted	not attempted	not attempted	not attempted	not attempted
Contribution margin (loss)	0	0	0	0
Traceable fixed expenses:
not attempted	not attempted	not attempted	not attempted	not attempted
not attempted	not attempted	not attempted	not attempted	not attempted
not attempted	not attempted	not attempted	not attempted	not attempted
Total traceable fixed expenses	0	0	0	0
Product line segment margin (loss)	0	$0	$0	$0
not attempted	not attempted