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	$	926,000		$	264,000		$	408,000		$	254,000
Variable manufacturing and selling expenses		466,000			114,000			200,000			152,000
Contribution margin		460,000			150,000			208,000			102,000
Fixed expenses:
Advertising, traceable		69,400			8,500			40,500			20,400
Depreciation of special equipment		43,700			20,600			7,500			15,600
Salaries of product-line managers		115,600			40,900			38,600			36,100
Allocated common fixed expenses*		185,200			52,800			81,600			50,800
Total fixed expenses		413,900			122,800			168,200			122,900
Net operating income (loss)	$	46,100		$	27,200		$	39,800		$	(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.