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	$	917,000		$	262,000		$	402,000		$	253,000
Variable manufacturing and selling expenses		477,000			119,000			199,000			159,000
Contribution margin		440,000			143,000			203,000			94,000
Fixed expenses:
Advertising, traceable		70,400			8,600			40,900			20,900
Depreciation of special equipment		44,000			20,500			7,500			16,000
Salaries of product-line managers		115,700			41,000			38,500			36,200
Allocated common fixed expenses*		183,400			52,400			80,400			50,600
Total fixed expenses		413,500			122,500			167,300			123,700
Net operating income (loss)	$	26,500		$	20,500		$	35,700		$	(29,700)

*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.

Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes