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	$ 930,000	$ 268,000	$ 406,000	$ 256,000
Variable manufacturing and selling expenses	475,000	117,000	204,000	154,000
Contribution margin	455,000	151,000	202,000	102,000
Fixed expenses:
Advertising, traceable	69,200	8,700	40,200	20,300
Depreciation of special equipment	43,700	21,000	7,500	15,200
Salaries of product-line managers	115,700	40,700	38,600	36,400
Allocated common fixed expenses*	186,000	53,600	81,200	51,200
Total fixed expenses	414,600	124,000	167,500	123,100
Net operating income (loss)	$ 40,400	$ 27,000	$ 34,500	$ (21,100)

*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.

	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)

Required 2