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	$	927,000		$	269,000		$	406,000		$	252,000
Variable manufacturing and selling expenses		471,000			115,000			197,000			159,000
Contribution margin		456,000			154,000			209,000			93,000
Fixed expenses:
Advertising, traceable		70,300			8,700			41,000			20,600
Depreciation of special equipment		43,900			20,900			7,500			15,500
Salaries of product-line managers		115,900			40,400			38,700			36,800
Allocated common fixed expenses*		185,400			53,800			81,200			50,400
Total fixed expenses		415,500			123,800			168,400			123,300
Net operating income (loss)	$	40,500		$	30,200		$	40,600		$	(30,300)

*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.