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	$	923,000		$	267,000		$	405,000		$	251,000
Variable manufacturing and selling expenses		478,000			111,000			207,000			160,000
Contribution margin		445,000			156,000			198,000			91,000
Fixed expenses:
Advertising, traceable		69,800			8,900			40,700			20,200
Depreciation of special equipment		43,600			20,600			7,200			15,800
Salaries of product-line managers		114,400			40,500			38,300			35,600
Allocated common fixed expenses*		184,600			53,400			81,000			50,200
Total fixed expenses		412,400			123,400			167,200			121,800
Net operating income (loss)	$	32,600		$	32,600		$	30,800		$	(30,800)

*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.