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	$	919,000		$	261,000		$	406,000		$	252,000
Variable manufacturing and selling expenses		466,000			112,000			201,000			153,000
Contribution margin		453,000			149,000			205,000			99,000
Fixed expenses:
Advertising, traceable		69,700			8,100			40,800			20,800
Depreciation of special equipment		43,500			20,200			7,500			15,800
Salaries of product-line managers		115,800			40,500			38,400			36,900
Allocated common fixed expenses*		183,800			52,200			81,200			50,400
Total fixed expenses		412,800			121,000			167,900			123,900
Net operating income (loss)	$	40,200		$	28,000		$	37,100		$	(24,900)

*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.