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	$	922,000		$	268,000		$	404,000		$	250,000
Variable manufacturing and selling expenses		473,000			114,000			203,000			156,000
Contribution margin		449,000			154,000			201,000			94,000
Fixed expenses:
Advertising, traceable		69,800			8,600			40,700			20,500
Depreciation of special equipment		43,500			20,300			7,900			15,300
Salaries of product-line managers		115,100			40,600			39,000			35,500
Allocated common fixed expenses*		184,400			53,600			80,800			50,000
Total fixed expenses		412,800			123,100			168,400			121,300
Net operating income (loss)	$	36,200		$	30,900		$	32,600		$	(27,300)

*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.