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		$	264,000		$	405,000		$	258,000
Variable manufacturing and selling expenses		478,000			116,000			205,000			157,000
Contribution margin		449,000			148,000			200,000			101,000
Fixed expenses:
Advertising, traceable		69,700			8,900			40,100			20,700
Depreciation of special equipment		44,500			20,900			7,600			16,000
Salaries of product-line managers		114,300			40,100			38,800			35,400
Allocated common fixed expenses*		185,400			52,800			81,000			51,600
Total fixed expenses		413,900			122,700			167,500			123,700
Net operating income (loss)	$	35,100		$	25,300		$	32,500		$	(22,700)

*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.