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	$ 920,000	$ 268,000	$ 401,000	$ 251,000
Variable manufacturing and selling expenses	464,000	110,000	200,000	154,000
Contribution margin	456,000	158,000	201,000	97,000
Fixed expenses:
Advertising, traceable	69,900	8,800	40,200	20,900
Depreciation of special equipment	44,200	21,000	7,800	15,400
Salaries of product-line managers	114,600	40,100	38,800	35,700
Allocated common fixed expenses*	184,000	53,600	80,200	50,200
Total fixed expenses	412,700	123,500	167,000	122,200
Net operating income (loss)	$ 43,300	$ 34,500	$ 34,000	$ (25,200)

*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? Should the production and sale of racing bikes be discontinued? Prepare a properly formatted segmented income statement that would be more useful to management in assessing profitability of the various product lines