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		$	267,000		$	405,000		$	255,000
Variable manufacturing and selling expenses		485,000			119,000			208,000			158,000
Contribution margin		442,000			148,000			197,000			97,000
Fixed expenses:
Advertising, traceable		69,100			8,700			40,100			20,300
Depreciation of special equipment		44,000			20,400			7,700			15,900
Salaries of product-line managers		113,900			40,500			38,200			35,200
Allocated common fixed expenses*		185,400			53,400			81,000			51,000
Total fixed expenses		412,400			123,000			167,000			122,400
Net operating income (loss)	$	29,600		$	25,000		$	30,000		$	(25,400)

*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.

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)