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		$	270,000		$	403,000		$	252,000
Variable manufacturing and selling expenses		470,000			118,000			196,000			156,000
Contribution margin		455,000			152,000			207,000			96,000
Fixed expenses:
Advertising, traceable		68,700			8,400			40,200			20,100
Depreciation of special equipment		43,500			20,300			7,500			15,700
Salaries of product-line managers		114,900			40,800			38,900			35,200
Allocated common fixed expenses*		185,000			54,000			80,600			50,400
Total fixed expenses		412,100			123,500			167,200			121,400
Net operating income (loss)	$	42,900		$	28,500		$	39,800		$	(25,400)

*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.