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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 $ 932,000 $ 269,000 $ 408,000 $ 255,000 Variable manufacturing and selling expenses 472,000 120,000 196,000 156,000 Contribution margin 460,000 149,000 212,000 99,000 Fixed expenses: Advertising, traceable 70,400 8,900 40,900 20,600 Depreciation of special equipment 43,100 20,600 7,400 15,100 Salaries of product-line managers 115,500 40,500 38,600 36,400 Allocated common fixed expenses* 186,400 53,800 81,600 51,000 Total fixed expenses 415,400 123,800 168,500 123,100 Net operating income (loss) $ 44,600 $ 25,200 $ 43,500 $ (24,100) *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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