The Regal CycleCompany manufactures three types of bicycles—a dirt bike, amountain bike, and a racing bike. Data on sales and expenses forthe past quarter follow:

	Total			Dirt Bikes			Mountain Bikes			Racing Bikes
Sales	$	917,000		$	264,000		$	401,000		$	252,000
Variablemanufacturing and selling expenses		466,000			110,000			202,000			154,000
Contributionmargin		451,000			154,000			199,000			98,000
Fixedexpenses:
Advertising,traceable		69,600			8,400			41,000			20,200
Depreciation ofspecial equipment		43,900			20,600			7,900			15,400
Salaries ofproduct-line managers		116,200			40,800			38,900			36,500
Allocated commonfixed expenses*		183,400			52,800			80,200			50,400
Total fixedexpenses		413,100			122,600			168,000			122,500
Net operatingincome (loss)	$	37,900		$	31,400		$	31,000		$	(24,500)

*Allocated on thebasis of sales dollars.

Management isconcerned about the continued losses shown by the racing bikes andwants a recommendation as to whether or not the line should bediscontinued. The special equipment used to produce racing bikeshas no resale value and does not wear out.

Required:

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

2. Should theproduction and sale of racing bikes be discontinued?

3. Prepare a properlyformatted segmented income statement that would be more useful tomanagement in assessing the long-run profitability of the variousproduct lines.