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	$	924,000		$	263,000		$	402,000		$	259,000
Variable manufacturing and selling expenses		460,000			111,000			199,000			150,000
Contribution margin		464,000			152,000			203,000			109,000
Fixed expenses:
Advertising, traceable		70,100			8,900			40,200			21,000
Depreciation of special equipment		43,900			20,600			7,900			15,400
Salaries of product-line managers		115,500			40,600			38,700			36,200
Allocated common fixed expenses*		184,800			52,600			80,400			51,800
Total fixed expenses		414,300			122,700			167,200			124,400
Net operating income (loss)	$	49,700		$	29,300		$	35,800		$	(15,400)

*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.