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	$	924,000		$	263,000		$	407,000		$	254,000
Variable manufacturing and selling expenses		481,000			114,000			207,000			160,000
Contribution margin		443,000			149,000			200,000			94,000
Fixed expenses:
Advertising, traceable		69,300			8,400			40,600			20,300
Depreciation of special equipment		43,300			20,400			7,500			15,400
Salaries of product-line managers		114,900			40,100			38,400			36,400
Allocated common fixed expenses*		184,800			52,600			81,400			50,800
Total fixed expenses		412,300			121,500			167,900			122,900
Net operating income (loss)	$	30,700		$	27,500		$	32,100		$	(28,900)

*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.