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	$	918,000		$	267,000		$	400,000		$	251,000
Variable manufacturing and selling expenses		481,000			116,000			209,000			156,000
Contribution margin		437,000			151,000			191,000			95,000
Fixed expenses:
Advertising, traceable		69,900			8,700			40,400			20,800
Depreciation of special equipment		43,800			20,300			7,600			15,900
Salaries of product-line managers		114,900			40,300			38,000			36,600
Allocated common fixed expenses*		183,600			53,400			80,000			50,200
Total fixed expenses		412,200			122,700			166,000			123,500
Net operating income (loss)	$	24,800		$	28,300		$	25,000		$	(28,500)

*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.