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	$	930,000		$	265,000		$	410,000		$	255,000
Variable manufacturing and selling expenses		473,000			111,000			207,000			155,000
Contribution margin		457,000			154,000			203,000			100,000
Fixed expenses:
Advertising, traceable		69,800			8,800			40,700			20,300
Depreciation of special equipment		44,400			20,800			7,700			15,900
Salaries of product-line managers		115,200			40,700			38,800			35,700
Allocated common fixed expenses*		186,000			53,000			82,000			51,000
Total fixed expenses		415,400			123,300			169,200			122,900
Net operating income (loss)	$	41,600		$	30,700		$	33,800		$	(22,900)

*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.