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	$ 921,000	$ 264,000	$ 401,000	$ 256,000
Variable manufacturing and selling expenses	466,000	112,000	195,000	159,000
Contribution margin	455,000	152,000	206,000	97,000
Fixed expenses:
Advertising, traceable	69,200	8,500	40,500	20,200
Depreciation of special equipment	43,900	20,800	7,300	15,800
Salaries of product-line managers	114,800	40,900	38,500	35,400
Allocated common fixed expenses*	184,200	52,800	80,200	51,200
Total fixed expenses	412,100	123,000	166,500	122,600
Net operating income (loss)	$ 42,900	$ 29,000	$ 39,500	$ (25,600)

*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.

Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) Totals Dirt Bikes Mountain Bikes R 20