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		$	408,000		$	255,000
Variable manufacturing and selling expenses		473,000			118,000			196,000			159,000
Contribution margin		454,000			146,000			212,000			96,000
Fixed expenses:
Advertising, traceable		70,500			8,800			40,700			21,000
Depreciation of special equipment		44,000			20,200			7,900			15,900
Salaries of product-line managers		115,100			40,700			39,000			35,400
Allocated common fixed expenses*		185,400			52,800			81,600			51,000
Total fixed expenses		415,000			122,500			169,200			123,300
Net operating income (loss)	$	39,000		$	23,500		$	42,800		$	(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.