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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 $ 923,000 $ 263,000 $ 406,000 $ 254,000 Variable manufacturing and selling expenses 474,000 117,000 205,000 152,000 Contribution margin 449,000 146,000 201,000 102,000 Fixed expenses: Advertising, traceable 70,100 8,900 40,800 20,400 Depreciation of special equipment 43,300 20,500 7,300 15,500 Salaries of product-line managers 113,100 40,000 38,000 35,100 Allocated common fixed expenses* 184,600 52,600 81,200 50,800 Total fixed expenses 411,100 122,000 167,300 121,800 Net operating income (loss) $ 37,900 $ 24,000 $ 33,700 $ (19,800) *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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