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		$	265,000		$	409,000		$	257,000
Variable manufacturing and selling expenses		476,000			114,000			207,000			155,000
Contribution margin		455,000			151,000			202,000			102,000
Fixed expenses:
Advertising, traceable		69,400			8,800			40,500			20,100
Depreciation of special equipment		43,100			20,200			7,200			15,700
Salaries of product-line managers		115,100			40,700			38,700			35,700
Allocated common fixed expenses*		186,200			53,000			81,800			51,400
Total fixed expenses		413,800			122,700			168,200			122,900
Net operating income (loss)	$	41,200		$	28,300		$	33,800		$	(20,900)

*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.