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The Regal Cycle Company manufactures three types of bicycles—adirt bike, a mountain bike, and a racing bike. Data on sales andexpenses for the past quarter follow:

	Total			Dirt Bikes			Mountain Bikes			Racing Bikes
Sales	$	922,000		$	268,000		$	403,000		$	251,000
Variable manufacturing and selling expenses		468,000			118,000			200,000			150,000
Contribution margin		454,000			150,000			203,000			101,000
Fixed expenses:
Advertising, traceable		69,600			8,200			40,900			20,500
Depreciation of special equipment		43,200			20,400			7,200			15,600
Salaries of product-line managers		114,400			40,600			38,500			35,300
Allocated common fixed expenses*		184,400			53,600			80,600			50,200
Total fixed expenses		411,600			122,800			167,200			121,600
Net operating income (loss)	$	42,400		$	27,200		$	35,800		$	(20,600)

*Allocated on the basis of sales dollars.

Management is concerned about the continued losses shown by theracing bikes and wants a recommendation as to whether or not theline should be discontinued. The special equipment used to produceracing bikes has no resale value and does not wear out.

Required:

1. What is the financial advantage (disadvantage) per quarter ofdiscontinuing the racing bikes?

2. Should the production and sale of racing bikes bediscontinued?

3. Prepare a properly formatted segmented income statement thatwould be more useful to management in assessing the long-runprofitability of the various product lines.