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		$	264,000		$	403,000		$	258,000
Variable manufacturing and selling expenses		473,000			117,000			204,000			152,000
Contribution margin		452,000			147,000			199,000			106,000
Fixed expenses:
Advertising, traceable		69,200			8,700			40,300			20,200
Depreciation of special equipment		44,000			20,300			7,900			15,800
Salaries of product-line managers		115,800			40,400			38,800			36,600
Allocated common fixed expenses*		185,000			52,800			80,600			51,600
Total fixed expenses		414,000			122,200			167,600			124,200
Net operating income (loss)	$	38,000		$	24,800		$	31,400		$	(18,200)

*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.