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	$	915,000		$	262,000		$	402,000		$	251,000
Variable manufacturing and selling expenses		469,000			120,000			198,000			151,000
Contribution margin		446,000			142,000			204,000			100,000
Fixed expenses:
Advertising, traceable		69,700			8,800			40,200			20,700
Depreciation of special equipment		44,000			20,400			7,800			15,800
Salaries of product-line managers		115,000			40,000			38,700			36,300
Allocated common fixed expenses*		183,000			52,400			80,400			50,200
Total fixed expenses		411,700			121,600			167,100			123,000
Net operating income (loss)	$	34,300		$	20,400		$	36,900		$	(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.