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	$	919,000		$	262,000		$	401,000		$	256,000
Variable manufacturing and selling expenses		471,000			118,000			198,000			155,000
Contribution margin		448,000			144,000			203,000			101,000
Fixed expenses:
Advertising, traceable		69,300			8,300			40,700			20,300
Depreciation of special equipment		44,100			20,900			7,900			15,300
Salaries of product-line managers		115,700			40,600			38,200			36,900
Allocated common fixed expenses*		183,800			52,400			80,200			51,200
Total fixed expenses		412,900			122,200			167,000			123,700
Net operating income (loss)	$	35,100		$	21,800		$	36,000		$	(22,700)

*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.

Totals	Dirt Bikes	Mountain Bikes	Racing Bikes
Contribution margin (loss)
Traceable fixed expenses:
Total traceable fixed expenses
Product line segment margin (loss)
Net operating income (loss)