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	$	926,000		$	264,000		$	408,000		$	254,000
Variable manufacturing and selling expenses		469,000			111,000			201,000			157,000
Contribution margin		457,000			153,000			207,000			97,000
Fixed expenses:
Advertising, traceable		69,900			8,800			40,100			21,000
Depreciation of special equipment		43,700			20,900			7,400			15,400
Salaries of product-line managers		114,500			40,100			38,800			35,600
Allocated common fixed expenses*		185,200			52,800			81,600			50,800
Total fixed expenses		413,300			122,600			167,900			122,800
Net operating income (loss)	$	43,700		$	30,400		$	39,100		$	(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.