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	$	929,000		$	262,000		$	408,000		$	259,000
Variable manufacturing and selling expenses		465,000			114,000			199,000			152,000
Contribution margin		464,000			148,000			209,000			107,000
Fixed expenses:
Advertising, traceable		69,000			8,300			40,200			20,500
Depreciation of special equipment		43,600			20,300			7,500			15,800
Salaries of product-line managers		115,600			40,200			39,000			36,400
Allocated common fixed expenses*		185,800			52,400			81,600			51,800
Total fixed expenses		414,000			121,200			168,300			124,500
Net operating income (loss)	$	50,000		$	26,800		$	40,700		$	(17,500)

*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? yes/no

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.

Totals	Dirt Bikes	Mountain Bikes	Racing Bikes
Contribution margin (loss)
Traceable fixed expenses:
Total traceable fixed expenses
Product line segment margin (loss)
Net operating income (loss)