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	$ 401,000	$ 253,000
Variable manufacturing and selling expenses	476,000	113,000	206,000	157,000
Contribution margin	445,000	154,000	195,000	96,000
Fixed expenses:
Advertising, traceable	69,100	8,400	40,400	20,300
Depreciation of special equipment	43,800	20,800	7,600	15,400
Salaries of product-line managers	116,300	41,000	39,000	36,300
Allocated common fixed expenses*	184,200	53,400	80,200	50,600
Total fixed expenses	413,400	123,600	167,200	122,600
Net operating income (loss)	$ 31,600	$ 30,400	$ 27,800	$ (26,600)

*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.

Q3. 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)