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	$	927,000		$	269,000		$	407,000		$	251,000
Variable manufacturing and selling expenses		476,000			116,000			200,000			160,000
Contribution margin		451,000			153,000			207,000			91,000
Fixed expenses:
Advertising, traceable		69,300			8,500			40,700			20,100
Depreciation of special equipment		42,700			20,200			7,300			15,200
Salaries of product-line managers		115,300			40,500			38,600			36,200
Allocated common fixed expenses*		185,400			53,800			81,400			50,200
Total fixed expenses		412,700			123,000			168,000			121,700
Net operating income (loss)	$	38,300		$	30,000		$	39,000		$	(30,700)

*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.

	Totals	Dirt Bikes	Mountain Bikes	Racing Bikes
Contribution Margin (Loss)
Traceable Fixed Expenses:
Total Traceable Fixed Expenses
Product line segment margin (loss)
Net operating income (loss)