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	$	934,000		$	269,000		$	409,000		$	256,000
Variable manufacturing and selling expenses		468,000			111,000			203,000			154,000
Contribution margin		466,000			158,000			206,000			102,000
Fixed expenses:
Advertising, traceable		69,100			8,100			40,800			20,200
Depreciation of special equipment		43,800			20,600			7,700			15,500
Salaries of product-line managers		115,100			40,500			39,000			35,600
Allocated common fixed expenses*		186,800			53,800			81,800			51,200
Total fixed expenses		414,800			123,000			169,300			122,500
Net operating income (loss)	$	51,200		$	35,000		$	36,700		$	(20,500)

*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.