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	$	916,000		$	262,000		$	401,000		$	253,000
Variable manufacturing and selling expenses		460,000			115,000			195,000			150,000
Contribution margin		456,000			147,000			206,000			103,000
Fixed expenses:
Advertising, traceable		70,200			8,800			40,500			20,900
Depreciation of special equipment		44,000			20,700			7,500			15,800
Salaries of product-line managers		114,400			40,700			38,600			35,100
Allocated common fixed expenses*		183,200			52,400			80,200			50,600
Total fixed expenses		411,800			122,600			166,800			122,400
Net operating income (loss)	$	44,200		$	24,400		$	39,200		$	(19,400)

*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.