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	$	927,000		$	265,000		$	404,000		$	258,000
Variable manufacturing and selling expenses		474,000			115,000			201,000			158,000
Contribution margin		453,000			150,000			203,000			100,000
Fixed expenses:
Advertising, traceable		69,600			8,600			40,300			20,700
Depreciation of special equipment		43,400			20,300			7,500			15,600
Salaries of product-line managers		114,800			40,100			38,100			36,600
Allocated common fixed expenses*		185,400			53,000			80,800			51,600
Total fixed expenses		413,200			122,000			166,700			124,500
Net operating income (loss)	$	39,800		$	28,000		$	36,300		$	(24,500)

*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.