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		$	267,000		$	403,000		$	255,000
Variable manufacturing and selling expenses		484,000			119,000			206,000			159,000
Contribution margin		441,000			148,000			197,000			96,000
Fixed expenses:
Advertising, traceable		70,000			8,200			40,900			20,900
Depreciation of special equipment		44,600			21,000			7,600			16,000
Salaries of product-line managers		115,600			40,900			38,100			36,600
Allocated common fixed expenses*		185,000			53,400			80,600			51,000
Total fixed expenses		415,200			123,500			167,200			124,500
Net operating income (loss)	$	25,800		$	24,500		$	29,800		$	(28,500)

*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.