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	$	926,000		$	261,000		$	409,000		$	256,000
Variable manufacturing and selling expenses		462,000			111,000			198,000			153,000
Contribution margin		464,000			150,000			211,000			103,000
Fixed expenses:
Advertising, traceable		70,200			8,900			40,500			20,800
Depreciation of special equipment		43,800			20,600			7,900			15,300
Salaries of product-line managers		115,400			40,500			38,500			36,400
Allocated common fixed expenses*		185,200			52,200			81,800			51,200
Total fixed expenses		414,600			122,200			168,700			123,700
Net operating income (loss)	$	49,400		$	27,800		$	42,300		$	(20,700)

*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.