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		$	261,000		$	405,000		$	258,000
Variable manufacturing and selling expenses		478,000			119,000			205,000			154,000
Contribution margin		446,000			142,000			200,000			104,000
Fixed expenses:
Advertising, traceable		69,600			8,300			40,800			20,500
Depreciation of special equipment		43,600			20,200			7,900			15,500
Salaries of product-line managers		115,700			40,700			38,900			36,100
Allocated common fixed expenses*		184,800			52,200			81,000			51,600
Total fixed expenses		413,700			121,400			168,600			123,700
Net operating income (loss)	$	32,300		$	20,600		$	31,400		$	(19,700)

*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.

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? Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? Yes ONO Required 1 Required 2 Required 3 Prepare a properly formatted segmented income statement that would be more useful to management in assessing the lo 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)