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	$	932,000		$	270,000		$	409,000		$	253,000
Variable manufacturing and selling expenses		467,000			118,000			194,000			155,000
Contribution margin		465,000			152,000			215,000			98,000
Fixed expenses:
Advertising, traceable		69,400			8,500			40,600			20,300
Depreciation of special equipment		43,100			20,500			7,300			15,300
Salaries of product-line managers		114,200			40,500			38,400			35,300
Allocated common fixed expenses*		186,400			54,000			81,800			50,600
Total fixed expenses		413,100			123,500			168,100			121,500
Net operating income (loss)	$	51,900		$	28,500		$	46,900		$	(23,500)

*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.