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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	$	920,000		$	269,000		$	400,000		$	251,000
Variable manufacturing and selling expenses		464,000			114,000			198,000			152,000
Contribution margin		456,000			155,000			202,000			99,000
Fixed expenses:
Advertising, traceable		69,700			8,800			40,200			20,700
Depreciation of special equipment		43,900			20,400			8,000			15,500
Salaries of product-line managers		114,100			40,100			38,600			35,400
Allocated common fixed expenses*		184,000			53,800			80,000			50,200
Total fixed expenses		411,700			123,100			166,800			121,800
Net operating income (loss)	$	44,300		$	31,900		$	35,200		$	(22,800)

*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.

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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