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	$	918,000		$	262,000		$	404,000		$	252,000
Variable manufacturing and selling expenses		458,000			110,000			195,000			153,000
Contribution margin		460,000			152,000			209,000			99,000
Fixed expenses:
Advertising, traceable		70,300			8,700			40,900			20,700
Depreciation of special equipment		44,000			20,500			7,600			15,900
Salaries of product-line managers		115,100			40,600			38,300			36,200
Allocated common fixed expenses*		183,600			52,400			80,800			50,400
Total fixed expenses		413,000			122,200			167,600			123,200
Net operating income (loss)	$	47,000		$	29,800		$	41,400		$	(24,200)

*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.