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	$	929,000		$	268,000		$	405,000		$	256,000
Variable manufacturing and selling expenses		477,000			118,000			199,000			160,000
Contribution margin		452,000			150,000			206,000			96,000
Fixed expenses:
Advertising, traceable		69,200			9,000			40,100			20,100
Depreciation of special equipment		43,800			21,000			7,600			15,200
Salaries of product-line managers		116,100			40,800			38,800			36,500
Allocated common fixed expenses*		185,800			53,600			81,000			51,200
Total fixed expenses		414,900			124,400			167,500			123,000
Net operating income (loss)	$	37,100		$	25,600		$	38,500		$	(27,000)

*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.