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	$ 264,000	$ 409,000	$ 251,000
Variable manufacturing and selling expenses	477,000	117,000	205,000	155,000
Contribution margin	447,000	147,000	204,000	96,000
Fixed expenses:
Advertising, traceable	69,700	8,600	40,200	20,900
Depreciation of special equipment	43,000	20,300	7,600	15,100
Salaries of product-line managers	114,800	40,700	38,000	36,100
Allocated common fixed expenses*	184,800	52,800	81,800	50,200
Total fixed expenses	412,300	122,400	167,600	122,300
Net operating income (loss)	$ 34,700	$ 24,600	$ 36,400	$ (26,300)

*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 the Racing Bikes? 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 long-run profitability of the various product lines. Complete this question by entering your answers in the tabs below. Should the production and sale of racing bikes be discontinued