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	$	930,000		$	265,000		$	408,000		$	257,000
Variable manufacturing and selling expenses		482,000			119,000			208,000			155,000
Contribution margin		448,000			146,000			200,000			102,000
Fixed expenses:
Advertising, traceable		69,500			8,300			40,300			20,900
Depreciation of special equipment		43,900			20,800			7,800			15,300
Salaries of product-line managers		115,100			40,200			38,400			36,500
Allocated common fixed expenses*		186,000			53,000			81,600			51,400
Total fixed expenses		414,500			122,300			168,100			124,100
Net operating income (loss)	$	33,500		$	23,700		$	31,900		$	(22,100)

*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.