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	$	933,000		$	265,000		$	408,000		$	260,000
Variable manufacturing and selling expenses		464,000			115,000			190,000			159,000
Contribution margin		469,000			150,000			218,000			101,000
Fixed expenses:
Advertising, traceable		69,700			8,500			40,600			20,600
Depreciation of special equipment		43,300			20,600			7,300			15,400
Salaries of product-line managers		115,400			40,600			38,600			36,200
Allocated common fixed expenses*		186,600			53,000			81,600			52,000
Total fixed expenses		415,000			122,700			168,100			124,200
Net operating income (loss)	$	54,000		$	27,300		$	49,900		$	(23,200)

*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.