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	$	924,000		$	266,000		$	403,000		$	255,000
Variable manufacturing and selling expenses		468,000			113,000			198,000			157,000
Contribution margin		456,000			153,000			205,000			98,000
Fixed expenses:
Advertising, traceable		70,100			8,800			40,300			21,000
Depreciation of special equipment		42,900			20,400			7,200			15,300
Salaries of product-line managers		114,700			40,700			38,100			35,900
Allocated common fixed expenses*		184,800			53,200			80,600			51,000
Total fixed expenses		412,500			123,100			166,200			123,200
Net operating income (loss)	$	43,500		$	29,900		$	38,800		$	(25,200)

*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.