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	$	920,000		$	267,000		$	401,000		$	252,000
Variable manufacturing and selling expenses		482,000			113,000			210,000			159,000
Contribution margin		438,000			154,000			191,000			93,000
Fixed expenses:
Advertising, traceable		69,700			8,600			40,400			20,700
Depreciation of special equipment		43,200			20,400			7,200			15,600
Salaries of product-line managers		114,000			40,100			38,200			35,700
Allocated common fixed expenses*		184,000			53,400			80,200			50,400
Total fixed expenses		410,900			122,500			166,000			122,400
Net operating income (loss)	$	27,100		$	31,500		$	25,000		$	(29,400)

*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.