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 $ 918,000 $ 263,000 $ 403,000 $ 252,000 Variable manufacturing and selling expenses 460,000 113,000 191,000 156,000 Contribution margin 458,000 150,000 212,000 96,000 Fixed expenses: Advertising, traceable 69,300 8,800 40,300 20,200 Depreciation of special equipment 43,800 20,600 7,200 16,000 Salaries of product-line managers 115,500 40,200 38,700 36,600 Allocated common fixed expenses* 183,600 52,600 80,600 50,400 Total fixed expenses 412,200 122,200 166,800 123,200 Net operating income (loss) $ 45,800 $ 27,800 $ 45,200 $ (27,200) *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. 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.

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

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.

	Totals	Dirt Bikes	Mountain Bikes	Racing Bikes
Contribution margin (loss)	0	0	0	0
Traceable fixed expenses:
Total traceable fixed expenses	0	0	0	0
Product line segment margin (loss)	0	$0	$0	$0
Net operating income (loss)	$0