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		$	263,000		$	402,000		$	258,000
Variable manufacturing and selling expenses		465,000			114,000			194,000			157,000
Contribution margin		458,000			149,000			208,000			101,000
Fixed expenses:
Advertising, traceable		70,000			8,800			40,300			20,900
Depreciation of special equipment		43,900			20,500			7,700			15,700
Salaries of product-line managers		114,200			40,400			38,600			35,200
Allocated common fixed expenses*		184,600			52,600			80,400			51,600
Total fixed expenses		412,700			122,300			167,000			123,400
Net operating income (loss)	$	45,300		$	26,700		$	41,000		$	(22,400)

*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.