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	$	933,000		$	265,000		$	409,000		$	259,000
Variable manufacturing and selling expenses		462,000			112,000			194,000			156,000
Contribution margin		471,000			153,000			215,000			103,000
Fixed expenses:
Advertising, traceable		69,300			8,300			40,100			20,900
Depreciation of special equipment		43,900			21,000			7,400			15,500
Salaries of product-line managers		114,600			40,900			38,000			35,700
Allocated common fixed expenses*		186,600			53,000			81,800			51,800
Total fixed expenses		414,400			123,200			167,300			123,900
Net operating income (loss)	$	56,600		$	29,800		$	47,700		$	(20,900)

*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.