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	$	928,000		$	267,000		$	406,000		$	255,000
Variable manufacturing and selling expenses		468,000			118,000			197,000			153,000
Contribution margin		460,000			149,000			209,000			102,000
Fixed expenses:
Advertising, traceable		69,700			8,600			40,200			20,900
Depreciation of special equipment		43,900			20,700			7,600			15,600
Salaries of product-line managers		116,200			40,800			39,000			36,400
Allocated common fixed expenses*		185,600			53,400			81,200			51,000
Total fixed expenses		415,400			123,500			168,000			123,900
Net operating income (loss)	$	44,600		$	25,500		$	41,000		$	(21,900)

*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.

Complete this question by entering your answers in the tabs below. Required1Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes