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	$	927,000		$	269,000		$	405,000		$	253,000
Variable manufacturing and selling expenses		473,000			112,000			205,000			156,000
Contribution margin		454,000			157,000			200,000			97,000
Fixed expenses:
Advertising, traceable		69,500			8,500			40,500			20,500
Depreciation of special equipment		43,900			20,200			7,800			15,900
Salaries of product-line managers		114,300			40,100			38,200			36,000
Allocated common fixed expenses*		185,400			53,800			81,000			50,600
Total fixed expenses		413,100			122,600			167,500			123,000
Net operating income (loss)	$	40,900		$	34,400		$	32,500		$	(26,000)

*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.