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	$	930,000		$	268,000		$	406,000		$	256,000
Variable manufacturing and selling expenses		476,000			113,000			204,000			159,000
Contribution margin		454,000			155,000			202,000			97,000
Fixed expenses:
Advertising, traceable		70,700			9,000			40,800			20,900
Depreciation of special equipment		43,800			20,300			7,900			15,600
Salaries of product-line managers		114,600			40,900			38,600			35,100
Allocated common fixed expenses*		186,000			53,600			81,200			51,200
Total fixed expenses		415,100			123,800			168,500			122,800
Net operating income (loss)	$	38,900		$	31,200		$	33,500		$	(25,800)

*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.