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		$	263,000		$	402,000		$	253,000
Variable manufacturing and selling expenses		466,000			117,000			191,000			158,000
Contribution margin		452,000			146,000			211,000			95,000
Fixed expenses:
Advertising, traceable		70,300			8,900			41,000			20,400
Depreciation of special equipment		43,300			20,700			7,300			15,300
Salaries of product-line managers		115,500			40,300			38,500			36,700
Allocated common fixed expenses*		183,600			52,600			80,400			50,600
Total fixed expenses		412,700			122,500			167,200			123,000
Net operating income (loss)	$	39,300		$	23,500		$	43,800		$	(28,000)

*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.