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		$	269,000		$	401,000		$	256,000
Variable manufacturing and selling expenses		477,000			117,000			204,000			156,000
Contribution margin		449,000			152,000			197,000			100,000
Fixed expenses:
Advertising, traceable		69,600			8,900			40,100			20,600
Depreciation of special equipment		43,400			20,500			7,500			15,400
Salaries of product-line managers		115,200			40,300			38,500			36,400
Allocated common fixed expenses*		185,200			53,800			80,200			51,200
Total fixed expenses		413,400			123,500			166,300			123,600
Net operating income (loss)	$	35,600		$	28,500		$	30,700		$	(23,600)

*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.