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	$	928,000		$	269,000		$	403,000		$	256,000
Variable manufacturing and selling expenses		473,000			113,000			203,000			157,000
Contribution margin		455,000			156,000			200,000			99,000
Fixed expenses:
Advertising, traceable		69,800			8,200			40,900			20,700
Depreciation of special equipment		43,600			20,100			7,600			15,900
Salaries of product-line managers		114,400			40,400			38,900			35,100
Allocated common fixed expenses*		185,600			53,800			80,600			51,200
Total fixed expenses		413,400			122,500			168,000			122,900
Net operating income (loss)	$	41,600		$	33,500		$	32,000		$	(23,900)

*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.