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	$	931,000		$	264,000		$	407,000		$	260,000
Variable manufacturing and selling expenses		477,000			113,000			208,000			156,000
Contribution margin		454,000			151,000			199,000			104,000
Fixed expenses:
Advertising, traceable		69,400			8,600			40,300			20,500
Depreciation of special equipment		43,100			20,200			7,400			15,500
Salaries of product-line managers		115,700			40,400			38,700			36,600
Allocated common fixed expenses*		186,200			52,800			81,400			52,000
Total fixed expenses		414,400			122,000			167,800			124,600
Net operating income (loss)	$	39,600		$	29,000		$	31,200		$	(20,600)

*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.