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		$	261,000		$	408,000		$	257,000
Variable manufacturing and selling expenses		480,000			114,000			206,000			160,000
Contribution margin		446,000			147,000			202,000			97,000
Fixed expenses:
Advertising, traceable		69,300			8,800			40,100			20,400
Depreciation of special equipment		44,000			20,900			7,400			15,700
Salaries of product-line managers		114,100			40,900			38,100			35,100
Allocated common fixed expenses*		185,200			52,200			81,600			51,400
Total fixed expenses		412,600			122,800			167,200			122,600
Net operating income (loss)	$	33,400		$	24,200		$	34,800		$	(25,600)

*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.