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	$	933,000		$	269,000		$	405,000		$	259,000
Variable manufacturing and selling expenses		475,000			113,000			204,000			158,000
Contribution margin		458,000			156,000			201,000			101,000
Fixed expenses:
Advertising, traceable		70,300			8,800			40,800			20,700
Depreciation of special equipment		42,900			20,200			7,100			15,600
Salaries of product-line managers		115,000			40,700			38,900			35,400
Allocated common fixed expenses*		186,600			53,800			81,000			51,800
Total fixed expenses		414,800			123,500			167,800			123,500
Net operating income (loss)	$	43,200		$	32,500		$	33,200		$	(22,500)

*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.