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	$ 919,000	$ 263,000	$ 404,000	$ 252,000
Variable manufacturing and selling expenses	464,000	115,000	191,000	158,000
Contribution margin	455,000	148,000	213,000	94,000
Fixed expenses:
Advertising, traceable	70,600	9,000	40,800	20,800
Depreciation of special equipment	43,600	20,500	7,300	15,800
Salaries of product-line managers	115,200	40,400	39,000	35,800
Allocated common fixed expenses*	183,800	52,600	80,800	50,400
Total fixed expenses	413,200	122,500	167,900	122,800
Net operating income (loss)	$ 41,800	$ 25,500	$ 45,100	$ (28,800)

*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.

	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