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	$	925,000		$	267,000		$	400,000		$	258,000
Variable manufacturing and selling expenses		468,000			118,000			200,000			150,000
Contribution margin		457,000			149,000			200,000			108,000
Fixed expenses:
Advertising, traceable		69,700			8,200			40,600			20,900
Depreciation of special equipment		43,400			20,200			7,300			15,900
Salaries of product-line managers		113,500			40,000			38,300			35,200
Allocated common fixed expenses*		185,000			53,400			80,000			51,600
Total fixed expenses		411,600			121,800			166,200			123,600
Net operating income (loss)	$	45,400		$	27,200		$	33,800		$	(15,600)

*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?

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.

Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Required 1 Required 2 > Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? OYes ONO 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. 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)