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	$	931,000		$	269,000		$	405,000		$	257,000
Variable manufacturing and selling expenses		471,000			115,000			205,000			151,000
Contribution margin		460,000			154,000			200,000			106,000
Fixed expenses:
Advertising, traceable		69,100			8,200			40,500			20,400
Depreciation of special equipment		43,700			20,800			7,400			15,500
Salaries of product-line managers		113,700			40,200			38,300			35,200
Allocated common fixed expenses*		186,200			53,800			81,000			51,400
Total fixed expenses		412,700			123,000			167,200			122,500
Net operating income (loss)	$	47,300		$	31,000		$	32,800		$	(16,500)

*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.