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	$	923,000		$	262,000		$	407,000		$	254,000
Variable manufacturing and selling expenses		467,000			111,000			205,000			151,000
Contribution margin		456,000			151,000			202,000			103,000
Fixed expenses:
Advertising, traceable		69,500			8,200			40,500			20,800
Depreciation of special equipment		44,100			20,400			8,000			15,700
Salaries of product-line managers		115,200			40,100			38,400			36,700
Allocated common fixed expenses*		184,600			52,400			81,400			50,800
Total fixed expenses		413,400			121,100			168,300			124,000
Net operating income (loss)	$	42,600		$	29,900		$	33,700		$	(21,000)

*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.