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	$	923,000		$	267,000		$	406,000		$	250,000
Variable manufacturing and selling expenses		462,000			113,000			199,000			150,000
Contribution margin		461,000			154,000			207,000			100,000
Fixed expenses:
Advertising, traceable		69,200			8,200			40,600			20,400
Depreciation of special equipment		44,200			20,600			7,600			16,000
Salaries of product-line managers		115,400			40,800			38,400			36,200
Allocated common fixed expenses*		184,600			53,400			81,200			50,000
Total fixed expenses		413,400			123,000			167,800			122,600
Net operating income (loss)	$	47,600		$	31,000		$	39,200		$	(22,600)

*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.