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		$	264,000		$	404,000		$	251,000
Variable manufacturing and selling expenses		469,000			117,000			198,000			154,000
Contribution margin		450,000			147,000			206,000			97,000
Fixed expenses:
Advertising, traceable		69,800			8,400			40,400			21,000
Depreciation of special equipment		43,600			20,900			7,500			15,200
Salaries of product-line managers		115,900			40,900			38,600			36,400
Allocated common fixed expenses*		183,800			52,800			80,800			50,200
Total fixed expenses		413,100			123,000			167,300			122,800
Net operating income (loss)	$	36,900		$	24,000		$	38,700		$	(25,800)

*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.

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. Should the production and sale of racing bikes be discontinued? 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 a: fun profitability of the various product lines