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	$	926,000		$	267,000		$	408,000		$	251,000
Variable manufacturing and selling expenses		478,000			110,000			208,000			160,000
Contribution margin		448,000			157,000			200,000			91,000
Fixed expenses:
Advertising, traceable		69,800			8,300			40,800			20,700
Depreciation of special equipment		43,500			20,400			7,500			15,600
Salaries of product-line managers		116,500			41,000			38,600			36,900
Allocated common fixed expenses*		185,200			53,400			81,600			50,200
Total fixed expenses		415,000			123,100			168,500			123,400
Net operating income (loss)	$	33,000		$	33,900		$	31,500		$	(32,400)

*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.