Sales	$ 927,000	$ 262,000	$ 409,000	$ 256,000
Variable manufacturing and selling expenses	479,000	119,000	207,000	153,000
Contribution margin	448,000	143,000	202,000	103,000
Fixed expenses:
Advertising, traceable	70,300	8,900	40,600	20,800
Depreciation of special equipment	43,800	20,800	7,800	15,200
Salaries of product-line managers	114,600	40,400	38,400	35,800
Allocated common fixed expenses*	185,400	52,400	81,800	51,200
Total fixed expenses	414,100	122,500	168,600	123,000
Net operating income (loss)	$ 33,900	$ 20,500	$ 33,400	$ (20,000)

*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.

Required 1

Required 2

Required 3

What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?