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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	$	931,000		$	264,000		$	408,000		$	259,000
Variable manufacturing and selling expenses		464,000			117,000			193,000			154,000
Contribution margin		467,000			147,000			215,000			105,000
Fixed expenses:
Advertising, traceable		69,700			8,200			40,800			20,700
Depreciation of special equipment		43,900			20,700			7,400			15,800
Salaries of product-line managers		114,600			40,600			38,000			36,000
Allocated common fixed expenses*		186,200			52,800			81,600			51,800
Total fixed expenses		414,400			122,300			167,800			124,300
Net operating income (loss)	$	52,600		$	24,700		$	47,200		$	(19,300)

*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.