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	$	921,000		$	265,000		$	404,000		$	252,000
Variable manufacturing and selling expenses		471,000			116,000			196,000			159,000
Contribution margin		450,000			149,000			208,000			93,000
Fixed expenses:
Advertising, traceable		70,000			8,400			40,600			21,000
Depreciation of special equipment		43,700			20,300			7,900			15,500
Salaries of product-line managers		113,900			40,200			38,600			35,100
Allocated common fixed expenses*		184,200			53,000			80,800			50,400
Total fixed expenses		411,800			121,900			167,900			122,000
Net operating income (loss)	$	38,200		$	27,100		$	40,100		$	(29,000)

*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.