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	$	933,000		$	269,000		$	409,000		$	255,000
Variable manufacturing and selling expenses		459,000			113,000			195,000			151,000
Contribution margin		474,000			156,000			214,000			104,000
Fixed expenses:
Advertising, traceable		69,500			8,500			40,200			20,800
Depreciation of special equipment		43,400			20,800			7,200			15,400
Salaries of product-line managers		113,500			40,200			38,100			35,200
Allocated common fixed expenses*		186,600			53,800			81,800			51,000
Total fixed expenses		413,000			123,300			167,300			122,400
Net operating income (loss)	$	61,000		$	32,700		$	46,700		$	(18,400)

*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.