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	$	926,000		$	263,000		$	406,000		$	257,000
Variable manufacturing and selling expenses		470,000			113,000			206,000			151,000
Contribution margin		456,000			150,000			200,000			106,000
Fixed expenses:
Advertising, traceable		69,100			8,200			40,800			20,100
Depreciation of special equipment		42,800			20,100			7,600			15,100
Salaries of product-line managers		114,700			40,400			38,600			35,700
Allocated common fixed expenses*		185,200			52,600			81,200			51,400
Total fixed expenses		411,800			121,300			168,200			122,300
Net operating income (loss)	$	44,200		$	28,700		$	31,800		$	(16,300)

*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.

Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? Yes No Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 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. Totals Dirt Bikes Mountain Bikes Racing Bikes 0 Contribution margin (loss) Traceable fixed expenses: 0 0 Total traceable fixed expenses Product line segment margin (loss) 0 $ 0 $ 0 $ 0 Net operating income (loss) $ 0