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		$	264,000		$	402,000		$	254,000
Variable manufacturing and selling expenses		473,000			120,000			197,000			156,000
Contribution margin		447,000			144,000			205,000			98,000
Fixed expenses:
Advertising, traceable		70,300			8,500			40,900			20,900
Depreciation of special equipment		44,500			20,600			7,900			16,000
Salaries of product-line managers		114,100			40,600			38,500			35,000
Allocated common fixed expenses*		184,000			52,800			80,400			50,800
Total fixed expenses		412,900			122,500			167,700			122,700
Net operating income (loss)	$	34,100		$	21,500		$	37,300		$	(24,700)

*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.