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	$	925,000		$	269,000		$	402,000		$	254,000
Variable manufacturing and selling expenses		479,000			120,000			207,000			152,000
Contribution margin		446,000			149,000			195,000			102,000
Fixed expenses:
Advertising, traceable		69,300			8,600			40,200			20,500
Depreciation of special equipment		43,100			20,300			7,200			15,600
Salaries of product-line managers		113,700			40,300			38,300			35,100
Allocated common fixed expenses*		185,000			53,800			80,400			50,800
Total fixed expenses		411,100			123,000			166,100			122,000
Net operating income (loss)	$	34,900		$	26,000		$	28,900		$	(20,000)

*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.