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	$	933,000		$	270,000		$	410,000		$	253,000
Variable manufacturing and selling expenses		481,000			116,000			210,000			155,000
Contribution margin		452,000			154,000			200,000			98,000
Fixed expenses:
Advertising, traceable		69,300			8,200			40,500			20,600
Depreciation of special equipment		42,800			20,300			7,300			15,200
Salaries of product-line managers		114,800			40,600			38,900			35,300
Allocated common fixed expenses*		186,600			54,000			82,000			50,600
Total fixed expenses		413,500			123,100			168,700			121,700
Net operating income (loss)	$	38,500		$	30,900		$	31,300		$	(23,700)

*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.

What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? Should the production and sale of racing bikes be discontinued? Prepare a properly formatted segmented income statement that would be more useful to management in asses run profitability of the various product lines