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	$ 922,000	$ 262,000	$ 406,000	$ 254,000
Variable manufacturing and selling expenses	464,000	111,000	202,000	151,000
Contribution margin	458,000	151,000	204,000	103,000
Fixed expenses:
Advertising, traceable	69,500	8,500	40,400	20,600
Depreciation of special equipment	44,700	20,700	8,000	16,000
Salaries of product-line managers	114,500	40,700	38,600	35,200
Allocated common fixed expenses*	184,400	52,400	81,200	50,800
Total fixed expenses	413,100	122,300	168,200	122,600
Net operating income (loss)	$ 44,900	$ 28,700	$ 35,800	$ (19,600)

*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. Properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines.

• Required 1
• Required 2
• Required 3

What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?