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	$	925,000		$	267,000		$	400,000		$	258,000
Variable manufacturing and selling expenses		471,000			119,000			196,000			156,000
Contribution margin		454,000			148,000			204,000			102,000
Fixed expenses:
Advertising, traceable		69,500			8,400			40,800			20,300
Depreciation of special equipment		43,200			20,100			7,400			15,700
Salaries of product-line managers		115,200			40,100			38,200			36,900
Allocated common fixed expenses*		185,000			53,400			80,000			51,600
Total fixed expenses		412,900			122,000			166,400			124,500
Net operating income (loss)	$	41,100		$	26,000		$	37,600		$	(22,500)

*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.