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	$	931,000		$	267,000		$	409,000		$	255,000
Variable manufacturing and selling expenses		461,000			119,000			191,000			151,000
Contribution margin		470,000			148,000			218,000			104,000
Fixed expenses:
Advertising, traceable		69,700			8,900			40,200			20,600
Depreciation of special equipment		43,100			20,300			7,200			15,600
Salaries of product-line managers		114,700			40,500			38,600			35,600
Allocated common fixed expenses*		186,200			53,400			81,800			51,000
Total fixed expenses		413,700			123,100			167,800			122,800
Net operating income (loss)	$	56,300		$	24,900		$	50,200		$	(18,800)

*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.