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	$	927,000		$	268,000		$	408,000		$	251,000
Variable manufacturing and selling expenses		485,000			119,000			210,000			156,000
Contribution margin		442,000			149,000			198,000			95,000
Fixed expenses:
Advertising, traceable		70,100			8,700			40,700			20,700
Depreciation of special equipment		43,700			20,900			7,200			15,600
Salaries of product-line managers		114,800			40,100			38,600			36,100
Allocated common fixed expenses*		185,400			53,600			81,600			50,200
Total fixed expenses		414,000			123,300			168,100			122,600
Net operating income (loss)	$	28,000		$	25,700		$	29,900		$	(27,600)

*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?

Required 2:

Should the production and sale of racing bikes be discontinued?

Required 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.

	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)