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	$ 925,000	$ 264,000	$ 403,000	$ 258,000
Variable manufacturing and selling expenses	488,000	120,000	209,000	159,000
Contribution margin	437,000	144,000	194,000	99,000
Fixed expenses:
Advertising, traceable	69,700	8,200	40,900	20,600
Depreciation of special equipment	44,300	20,800	7,900	15,600
Salaries of product-line managers	114,300	40,700	38,400	35,200
Allocated common fixed expenses*	185,000	52,800	80,600	51,600
Total fixed expenses	413,300	122,500	167,800	123,000
Net operating income (loss)	$ 23,700	$ 21,500	$ 26,200	$ (24,000)

*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.

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)