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		$	262,000		$	407,000		$	255,000
Variable manufacturing and selling expenses		472,000			111,000			203,000			158,000
Contribution margin		452,000			151,000			204,000			97,000
Fixed expenses:
Advertising, traceable		70,100			9,000			40,800			20,300
Depreciation of special equipment		43,200			20,200			7,700			15,300
Salaries of product-line managers		116,400			40,900			38,700			36,800
Allocated common fixed expenses*		184,800			52,400			81,400			51,000
Total fixed expenses		414,500			122,500			168,600			123,400
Net operating income (loss)	$	37,500		$	28,500		$	35,400		$	(26,400)

*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.