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	$	929,000		$	264,000		$	409,000		$	256,000
Variable manufacturing and selling expenses		469,000			115,000			200,000			154,000
Contribution margin		460,000			149,000			209,000			102,000
Fixed expenses:
Advertising, traceable		69,400			8,500			40,600			20,300
Depreciation of special equipment		43,800			20,500			7,300			16,000
Salaries of product-line managers		114,400			40,600			38,500			35,300
Allocated common fixed expenses*		185,800			52,800			81,800			51,200
Total fixed expenses		413,400			122,400			168,200			122,800
Net operating income (loss)	$	46,600		$	26,600		$	40,800		$	(20,800)

*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?

	Yesradio button unchecked1 of 2 Noradio button unchecked2 of 2

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)