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	$ 927,000	$ 264,000	$ 407,000	$ 256,000
Variable manufacturing and selling expenses	468,000	119,000	191,000	158,000
Contribution margin	459,000	145,000	216,000	98,000
Fixed expenses:
Advertising, traceable	70,200	8,800	40,600	20,800
Depreciation of special equipment	43,000	20,600	7,100	15,300
Salaries of product-line managers	114,300	40,100	38,100	36,100
Allocated common fixed expenses*	185,400	52,800	81,400	51,200
Total fixed expenses	412,900	122,300	167,200	123,400
Net operating income (loss)	$ 46,100	$ 22,700	$ 48,800	$ (25,400)

*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.

NEED PART 3

	Totals	Dirt Bikes	Mountain Bikes	Racing Bikes
Contribution margin (loss)	0	0	0	0
Traceable fixed expenses:
Total traceable fixed expenses	0	0	0	0
Product line segment margin (loss)	0	$0	$0	$0
Net operating income (loss)	$0