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		$	401,000		$	255,000
Variable manufacturing and selling expenses		472,000			115,000			207,000			150,000
Contribution margin		451,000			152,000			194,000			105,000
Fixed expenses:
Advertising, traceable		68,800			8,200			40,400			20,200
Depreciation of special equipment		43,700			20,900			7,600			15,200
Salaries of product-line managers		116,300			40,600			38,700			37,000
Allocated common fixed expenses*		184,600			53,400			80,200			51,000
Total fixed expenses		413,400			123,100			166,900			123,400
Net operating income (loss)	$	37,600		$	28,900		$	27,100		$	(18,400)

*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.