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	$	916,000		$	262,000		$	401,000		$	253,000
Variable manufacturing and selling expenses		476,000			113,000			204,000			159,000
Contribution margin		440,000			149,000			197,000			94,000
Fixed expenses:
Advertising, traceable		69,700			8,400			40,500			20,800
Depreciation of special equipment		44,100			20,700			7,700			15,700
Salaries of product-line managers		115,600			40,600			38,500			36,500
Allocated common fixed expenses*		183,200			52,400			80,200			50,600
Total fixed expenses		412,600			122,100			166,900			123,600
Net operating income (loss)	$	27,400		$	26,900		$	30,100		$	(29,600)

*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.