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	$	925,000		$	267,000		$	406,000		$	252,000
Variable manufacturing and selling expenses		466,000			118,000			196,000			152,000
Contribution margin		459,000			149,000			210,000			100,000
Fixed expenses:
Advertising, traceable		69,500			8,200			40,700			20,600
Depreciation of special equipment		43,400			20,100			7,300			16,000
Salaries of product-line managers		114,700			40,100			38,700			35,900
Allocated common fixed expenses*		185,000			53,400			81,200			50,400
Total fixed expenses		412,600			121,800			167,900			122,900
Net operating income (loss)	$	46,400		$	27,200		$	42,100		$	(22,900)

*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.