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	$	919,000		$	263,000		$	402,000		$	254,000
Variable manufacturing and selling expenses		479,000			115,000			210,000			154,000
Contribution margin		440,000			148,000			192,000			100,000
Fixed expenses:
Advertising, traceable		69,800			8,600			40,800			20,400
Depreciation of special equipment		42,800			20,100			7,200			15,500
Salaries of product-line managers		116,200			40,300			39,000			36,900
Allocated common fixed expenses*		183,800			52,600			80,400			50,800
Total fixed expenses		412,600			121,600			167,400			123,600
Net operating income (loss)	$	27,400		$	26,400		$	24,600		$	(23,600)

*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.

1. What is the financial advantage (disadvantage) per quarter ofdiscontinuing the Racing Bikes?

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

Yes or No

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