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		$	268,000		$	406,000		$	254,000
Variable manufacturing and selling expenses		460,000			111,000			192,000			157,000
Contribution margin		468,000			157,000			214,000			97,000
Fixed expenses:
Advertising, traceable		69,700			8,300			41,000			20,400
Depreciation of special equipment		43,700			20,800			7,400			15,500
Salaries of product-line managers		113,800			40,700			38,000			35,100
Allocated common fixed expenses*		185,600			53,600			81,200			50,800
Total fixed expenses		412,800			123,400			167,600			121,800
Net operating income (loss)	$	55,200		$	33,600		$	46,400		$	(24,800)

*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 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: 0 Total traceable fixed expenses Product line segment margin (loss) 0 0 0 0 0 0 $ $ $ Net operating income (loss) Required 2 Required 3 >