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	$	926,000		$	266,000		$	409,000		$	251,000
Variable manufacturing and selling expenses		469,000			116,000			194,000			159,000
Contribution margin		457,000			150,000			215,000			92,000
Fixed expenses:
Advertising, traceable		70,000			8,700			40,500			20,800
Depreciation of special equipment		43,600			20,300			7,700			15,600
Salaries of product-line managers		116,300			40,800			38,500			37,000
Allocated common fixed expenses*		185,200			53,200			81,800			50,200
Total fixed expenses		415,100			123,000			168,500			123,600
Net operating income (loss)	$	41,900		$	27,000		$	46,500		$	(31,600)

*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.