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		$	261,000		$	404,000		$	254,000
Variable manufacturing and selling expenses		468,000			119,000			198,000			151,000
Contribution margin		451,000			142,000			206,000			103,000
Fixed expenses:
Advertising, traceable		69,500			8,200			40,700			20,600
Depreciation of special equipment		43,400			20,300			7,300			15,800
Salaries of product-line managers		115,100			40,400			38,700			36,000
Allocated common fixed expenses*		183,800			52,200			80,800			50,800
Total fixed expenses		411,800			121,100			167,500			123,200
Net operating income (loss)	$	39,200		$	20,900		$	38,500		$	(20,200)

*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.