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	$	930,000		$	270,000		$	409,000		$	251,000
Variable manufacturing and selling expenses		478,000			118,000			200,000			160,000
Contribution margin		452,000			152,000			209,000			91,000
Fixed expenses:
Advertising, traceable		69,800			8,800			40,500			20,500
Depreciation of special equipment		43,500			20,700			7,300			15,500
Salaries of product-line managers		114,900			40,300			38,600			36,000
Allocated common fixed expenses*		186,000			54,000			81,800			50,200
Total fixed expenses		414,200			123,800			168,200			122,200
Net operating income (loss)	$	37,800		$	28,200		$	40,800		$	(31,200)

*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.