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:

TotalDirt BikesMountain BikesRacing BikesSales$ 934,000$ 268,000$ 408,000$ 258,000Variable manufacturing and selling expenses458,000111,000192,000155,000Contribution margin476,000157,000216,000103,000Fixed expenses: Advertising, traceable69,8008,70040,80020,300Depreciation of special equipment43,50020,5007,80015,200Salaries of product-line managers115,40040,60038,50036,300Allocated common fixed expenses*186,80053,60081,60051,600Total fixed expenses415,500123,400168,700123,400Net operating income (loss)$ 60,500$ 33,600$ 47,300$ (20,400)

*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. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Complete this question by entering your answers in the tabs below. Should the production and sale of racing bikes be discontinued? Complete this question by entering your answers in the tabs below. 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