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	$	922,000		$	261,000		$	406,000		$	255,000
Variable manufacturing and selling expenses		472,000			112,000			205,000			155,000
Contribution margin		450,000			149,000			201,000			100,000
Fixed expenses:
Advertising, traceable		69,900			8,700			40,500			20,700
Depreciation of special equipment		44,100			20,900			7,700			15,500
Salaries of product-line managers		113,700			40,300			38,100			35,300
Allocated common fixed expenses*		184,400			52,200			81,200			51,000
Total fixed expenses		412,100			122,100			167,500			122,500
Net operating income (loss)	$	37,900		$	26,900		$	33,500		$	(22,500)

*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.

Totals Dirt Bikes Mountain Bikes Racing Bikes 0 0 0 0 Contribution margin (loss) Traceable fixed expenses: 0 0 0 0 Total traceable fixed expenses Product line segment margin (loss) 0 0 0 $ 0 Net operating income (loss) $ 0