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	$	936,000		$	269,000		$	408,000		$	259,000
Variable manufacturing and selling expenses		477,000			119,000			201,000			157,000
Contribution margin		459,000			150,000			207,000			102,000
Fixed expenses:
Advertising, traceable		70,000			8,600			40,500			20,900
Depreciation of special equipment		44,000			21,000			7,600			15,400
Salaries of product-line managers		114,700			40,800			38,200			35,700
Allocated common fixed expenses*		187,200			53,800			81,600			51,800
Total fixed expenses		415,900			124,200			167,900			123,800
Net operating income (loss)	$	43,100		$	25,800		$	39,100		$	(21,800)

*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. 60 Totals Dirt Bikes Mountain Bikes Racing Bikes points eBook Contribution margin (loss) Traceable fixed expenses. Hint Print References Total traceable fixed expenses Product line segment margin (loss) wwwwwwwwwww Net operating income (loss)