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he 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	$	921,000		$	261,000		$	402,000		$	258,000
Variable manufacturing and selling expenses		477,000			118,000			208,000			151,000
Contribution margin		444,000			143,000			194,000			107,000
Fixed expenses:
Advertising, traceable		69,200			8,300			40,400			20,500
Depreciation of special equipment		43,100			20,200			7,200			15,700
Salaries of product-line managers		114,300			40,100			38,200			36,000
Allocated common fixed expenses*		184,200			52,200			80,400			51,600
Total fixed expenses		410,800			120,800			166,200			123,800
Net operating income (loss)	$	33,200		$	22,200		$	27,800		$	(16,800)

*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.

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