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	$	920,000		$	266,000		$	401,000		$	253,000
Variable manufacturing and selling expenses		466,000			120,000			192,000			154,000
Contribution margin		454,000			146,000			209,000			99,000
Fixed expenses:
Advertising, traceable		69,000			8,300			40,500			20,200
Depreciation of special equipment		43,800			20,500			7,400			15,900
Salaries of product-line managers		114,400			40,500			38,600			35,300
Allocated common fixed expenses*		184,000			53,200			80,200			50,600
Total fixed expenses		411,200			122,500			166,700			122,000
Net operating income (loss)	$	42,800		$	23,500		$	42,300		$	(23,000)

*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.