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	$	925,000		$	264,000		$	410,000		$	251,000
Variable manufacturing and selling expenses		481,000			116,000			207,000			158,000
Contribution margin		444,000			148,000			203,000			93,000
Fixed expenses:
Advertising, traceable		69,600			8,700			40,700			20,200
Depreciation of special equipment		43,100			20,800			7,100			15,200
Salaries of product-line managers		115,600			40,000			38,800			36,800
Allocated common fixed expenses*		185,000			52,800			82,000			50,200
Total fixed expenses		413,300			122,300			168,600			122,400
Net operating income (loss)	$	30,700		$	25,700		$	34,400		$	(29,400)

*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.