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	$	916,000		$	262,000		$	403,000		$	251,000
Variable manufacturing and selling expenses		472,000			111,000			202,000			159,000
Contribution margin		444,000			151,000			201,000			92,000
Fixed expenses:
Advertising, traceable		69,800			8,700			40,800			20,300
Depreciation of special equipment		44,000			20,500			7,500			16,000
Salaries of product-line managers		114,200			41,000			38,100			35,100
Allocated common fixed expenses*		183,200			52,400			80,600			50,200
Total fixed expenses		411,200			122,600			167,000			121,600
Net operating income (loss)	$	32,800		$	28,400		$	34,000		$	(29,600)

*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.