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	$	921,000		$	261,000		$	405,000		$	255,000
Variable manufacturing and selling expenses		472,000			118,000			201,000			153,000
Contribution margin		449,000			143,000			204,000			102,000
Fixed expenses:
Advertising, traceable		69,300			8,300			40,200			20,800
Depreciation of special equipment		44,300			20,800			7,900			15,600
Salaries of product-line managers		114,400			40,900			38,100			35,400
Allocated common fixed expenses*		184,200			52,200			81,000			51,000
Total fixed expenses		412,200			122,200			167,200			122,800
Net operating income (loss)	$	36,800		$	20,800		$	36,800		$	(20,800)

*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.