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	$	931,000		$	266,000		$	407,000		$	258,000
Variable manufacturing and selling expenses		471,000			117,000			201,000			153,000
Contribution margin		460,000			149,000			206,000			105,000
Fixed expenses:
Advertising, traceable		69,600			8,500			40,700			20,400
Depreciation of special equipment		43,200			20,600			7,200			15,400
Salaries of product-line managers		114,100			40,000			38,000			36,100
Allocated common fixed expenses*		186,200			53,200			81,400			51,600
Total fixed expenses		413,100			122,300			167,300			123,500
Net operating income (loss)	$	46,900		$	26,700		$	38,700		$	(18,500)

*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 3 Should the production and sale of racing bikes be discontinued? Yes No 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)