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	$	925,000		$	262,000		$	406,000		$	257,000
Variable manufacturing and selling expenses		460,000			110,000			193,000			157,000
Contribution margin		465,000			152,000			213,000			100,000
Fixed expenses:
Advertising, traceable		69,000			8,300			40,100			20,600
Depreciation of special equipment		43,100			20,400			7,500			15,200
Salaries of product-line managers		115,000			40,300			38,800			35,900
Allocated common fixed expenses*		185,000			52,400			81,200			51,400
Total fixed expenses		412,100			121,400			167,600			123,100
Net operating income (loss)	$	52,900		$	30,600		$	45,400		$	(23,100)

*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.

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.