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		$	269,000		$	401,000		$	260,000
Variable manufacturing and selling expenses		470,000			118,000			199,000			153,000
Contribution margin		460,000			151,000			202,000			107,000
Fixed expenses:
Advertising, traceable		69,100			8,300			40,400			20,400
Depreciation of special equipment		43,800			20,800			7,100			15,900
Salaries of product-line managers		115,400			40,000			38,700			36,700
Allocated common fixed expenses*		186,000			53,800			80,200			52,000
Total fixed expenses		414,300			122,900			166,400			125,000
Net operating income (loss)	$	45,700		$	28,100		$	35,600		$	(18,000)

*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? Financial (disadvantage) per quarter 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 0 0 0 0 Sales Variable manufacturing and selling expenses Contribution margin (loss) Traceable fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of the product line managers Total traceable fixed expenses Product line segment margin (loss) Common fixed expenses Net operating income (loss) 01 0 0 $ 0 $