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	$	932,000		$	268,000		$	406,000		$	258,000
Variable manufacturing and selling expenses		462,000			112,000			193,000			157,000
Contribution margin		470,000			156,000			213,000			101,000
Fixed expenses:
Advertising, traceable		69,800			8,800			40,500			20,500
Depreciation of special equipment		44,100			20,900			7,200			16,000
Salaries of product-line managers		114,900			40,800			38,800			35,300
Allocated common fixed expenses*		186,400			53,600			81,200			51,600
Total fixed expenses		415,200			124,100			167,700			123,400
Net operating income (loss)	$	54,800		$	31,900		$	45,300		$	(22,400)

*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