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$923,000$266,000$405,000$252,000Variable manufacturing and selling expenses479,000112,000209,000158,000Contribution margin444,000154,000196,00094,000Fixed expenses:Advertising, traceable69,3008,20040,20020,900Depreciation of special equipment44,40020,9007,90015,600Salaries of product-line managers116,20040,80038,90036,500Allocated common fixed expenses*184,60053,20081,00050,400Total fixed expenses414,500123,100168,000123,400Net operating income (loss)$29,500$30,900$28,000$(29,400)

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