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		$	267,000		$	402,000		$	252,000
Variable manufacturing and selling expenses		472,000			112,000			204,000			156,000
Contribution margin		449,000			155,000			198,000			96,000
Fixed expenses:
Advertising, traceable		69,800			8,500			40,400			20,900
Depreciation of special equipment		44,200			20,400			8,000			15,800
Salaries of product-line managers		115,800			40,500			38,800			36,500
Allocated common fixed expenses*		184,200			53,400			80,400			50,400
Total fixed expenses		414,000			122,800			167,600			123,600
Net operating income (loss)	$	35,000		$	32,200		$	30,400		$	(27,600)

*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.

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)