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	$	931,000		$	269,000		$	407,000		$	255,000
Variable manufacturing and selling expenses		468,000			117,000			194,000			157,000
Contribution margin		463,000			152,000			213,000			98,000
Fixed expenses:
Advertising, traceable		69,400			8,500			40,400			20,500
Depreciation of special equipment		44,200			21,000			7,400			15,800
Salaries of product-line managers		115,900			41,000			38,900			36,000
Allocated common fixed expenses*		186,200			53,800			81,400			51,000
Total fixed expenses		415,700			124,300			168,100			123,300
Net operating income (loss)	$	47,300		$	27,700		$	44,900		$	(25,300)

*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.