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		$	265,000		$	407,000		$	254,000
Variable manufacturing and selling expenses		467,000			111,000			197,000			159,000
Contribution margin		459,000			154,000			210,000			95,000
Fixed expenses:
Advertising, traceable		69,200			8,400			40,400			20,400
Depreciation of special equipment		43,600			20,900			7,400			15,300
Salaries of product-line managers		115,900			40,900			38,300			36,700
Allocated common fixed expenses*		185,200			53,000			81,400			50,800
Total fixed expenses		413,900			123,200			167,500			123,200
Net operating income (loss)	$	45,100		$	30,800		$	42,500		$	(28,200)

*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.