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:

TotalDirt

BikesMountain BikesRacing

BikesSales$920,000$262,000$406,000$252,000Variable manufacturing and selling expenses484,000120,000209,000155,000Contribution margin436,000142,000197,00097,000Fixed expenses:Advertising, traceable69,1008,30040,60020,200Depreciation of special equipment43,20020,4007,20015,600Salaries of product-line managers115,00040,70038,30036,000Allocated common fixed expenses*184,00052,40081,20050,400Total fixed expenses411,300121,800167,300122,200Net operating income (loss)$24,700$20,200$29,700$(25,200)

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