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	$ 262,000	$ 402,000	$ 255,000
Variable manufacturing and selling expenses	482,000	117,000	208,000	157,000
Contribution margin	437,000	145,000	194,000	98,000
Fixed expenses:
Advertising, traceable	68,700	8,200	40,300	20,200
Depreciation of special equipment	43,400	20,700	7,600	15,100
Salaries of product-line managers	114,500	40,600	38,300	35,600
Allocated common fixed expenses*	183,800	52,400	80,400	51,000
Total fixed expenses	410,400	121,900	166,600	121,900
Net operating income (loss)	$ 26,600	$ 23,100	$ 27,400	$ (23,900)

*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.

eBook Complete this question by entering your answers in the tabs below. Hint Print Required 1 Required 2 Required 3 References What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Required 1 Required 2 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. 10 points Totals Dirt Bikes Mountain Bikes Racing Bikes Skipped eBook Contribution margin (loss) Traceable fixed expenses Hint Print References Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss)