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	$	923,000		$	265,000		$	403,000		$	255,000
Variable manufacturing and selling expenses		476,000			118,000			201,000			157,000
Contribution margin		447,000			147,000			202,000			98,000
Fixed expenses:
Advertising, traceable		69,100			8,700			40,200			20,200
Depreciation of special equipment		43,800			20,700			7,200			15,900
Salaries of product-line managers		115,300			40,900			38,900			35,500
Allocated common fixed expenses*		184,600			53,000			80,600			51,000
Total fixed expenses		412,800			123,300			166,900			122,600
Net operating income (loss)	$	34,200		$	23,700		$	35,100		$	(24,600)

*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.