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	$	928,000		$	267,000		$	404,000		$	257,000
Variable manufacturing and selling expenses		466,000			113,000			200,000			153,000
Contribution margin		462,000			154,000			204,000			104,000
Fixed expenses:
Advertising, traceable		70,000			8,900			40,200			20,900
Depreciation of special equipment		44,100			20,800			7,400			15,900
Salaries of product-line managers		115,200			40,100			38,800			36,300
Allocated common fixed expenses*		185,600			53,400			80,800			51,400
Total fixed expenses		414,900			123,200			167,200			124,500
Net operating income (loss)	$	47,100		$	30,800		$	36,800		$	(20,500)

*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.