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	$ 924,000	$ 267,000	$ 405,000	$ 252,000
Variable manufacturing and selling expenses	468,000	110,000	204,000	154,000
Contribution margin	456,000	157,000	201,000	98,000
Fixed expenses:
Advertising, traceable	69,200	8,100	40,200	20,900
Depreciation of special equipment	43,800	20,900	7,400	15,500
Salaries of product-line managers	115,400	40,300	38,800	36,300
Allocated common fixed expenses*	184,800	53,400	81,000	50,400
Total fixed expenses	413,200	122,700	167,400	123,100
Net operating income (loss)	$ 42,800	$ 34,300	$ 33,600	$ (25,100)

*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?

Financial advantage (disadvantage) per quarter OR Financial advantage per quarter

2. Should the production and sale of racing bikes be discontinued?

Yes OR No

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)