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	$	923,000		$	264,000		$	401,000		$	258,000
Variable manufacturing and selling expenses		479,000			115,000			210,000			154,000
Contribution margin		444,000			149,000			191,000			104,000
Fixed expenses:
Advertising, traceable		69,600			8,900			40,500			20,200
Depreciation of special equipment		43,300			20,500			7,400			15,400
Salaries of product-line managers		115,400			40,500			38,800			36,100
Allocated common fixed expenses*		184,600			52,800			80,200			51,600
Total fixed expenses		412,900			122,700			166,900			123,300
Net operating income (loss)	$	31,100		$	26,300		$	24,100		$	(19,300)

*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.