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	$	928,000		$	266,000		$	404,000		$	258,000
Variable manufacturing and selling expenses		461,000			116,000			192,000			153,000
Contribution margin		467,000			150,000			212,000			105,000
Fixed expenses:
Advertising, traceable		69,800			8,300			41,000			20,500
Depreciation of special equipment		43,700			20,700			7,300			15,700
Salaries of product-line managers		115,800			40,800			38,700			36,300
Allocated common fixed expenses*		185,600			53,200			80,800			51,600
Total fixed expenses		414,900			123,000			167,800			124,100
Net operating income (loss)	$	52,100		$	27,000		$	44,200		$	(19,100)

*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.