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	$	936,000		$	268,000		$	410,000		$	258,000
Variable manufacturing and selling expenses		470,000			116,000			196,000			158,000
Contribution margin		466,000			152,000			214,000			100,000
Fixed expenses:
Advertising, traceable		68,700			8,200			40,300			20,200
Depreciation of special equipment		43,600			20,800			7,300			15,500
Salaries of product-line managers		114,500			40,400			38,700			35,400
Allocated common fixed expenses*		187,200			53,600			82,000			51,600
Total fixed expenses		414,000			123,000			168,300			122,700
Net operating income (loss)	$	52,000		$	29,000		$	45,700		$	(22,700)

*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?

What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?

2. Should the production and sale of racing bikes be discontinued?

Yes or No

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.

Complete this question by entering your answers in the tabs below. 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) Pro 1