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	$ 923,000	$ 264,000	$ 402,000	$ 257,000
Variable manufacturing and selling expenses	474,000	116,000	203,000	155,000
Contribution margin	449,000	148,000	199,000	102,000
Fixed expenses:
Advertising, traceable	70,100	8,400	40,900	20,800
Depreciation of special equipment	44,200	21,000	7,400	15,800
Salaries of product-line managers	115,900	40,100	38,900	36,900
Allocated common fixed expenses*	184,600	52,800	80,400	51,400
Total fixed expenses	414,800	122,300	167,600	124,900
Net operating income (loss)	$ 34,200	$ 25,700	$ 31,400	$ (22,900)

*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. What is the financial advantage (disadvantage) per quarter of discontinuing t Complete this question by entering your answers in the tabs below. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the profitability of the various product lines