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		$	402,000		$	260,000
Variable manufacturing and selling expenses		473,000			117,000			203,000			153,000
Contribution margin		453,000			147,000			199,000			107,000
Fixed expenses:
Advertising, traceable		69,400			8,800			40,200			20,400
Depreciation of special equipment		43,300			20,200			7,600			15,500
Salaries of product-line managers		114,600			40,900			38,100			35,600
Allocated common fixed expenses*		185,200			52,800			80,400			52,000
Total fixed expenses		412,500			122,700			166,300			123,500
Net operating income (loss)	$	40,500		$	24,300		$	32,700		$	(16,500)

*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.