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 $ 267,000 $ 400,000 $ 251,000 Variable manufacturing and selling expenses 480,000 116,000 207,000 157,000 Contribution margin 438,000 151,000 193,000 94,000 Fixed expenses: Advertising, traceable 69,800 8,200 40,600 21,000 Depreciation of special equipment 43,900 20,700 7,400 15,800 Salaries of product-line managers 114,000 40,600 38,100 35,300 Allocated common fixed expenses* 183,600 53,400 80,000 50,200 Total fixed expenses 411,300 122,900 166,100 122,300 Net operating income (loss) $ 26,700 $ 28,100 $ 26,900 $ (28,300) *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.

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) Traceable fixed expenses Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss)