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	$	928,000		$	269,000		$	404,000		$	255,000
Variable manufacturing and selling expenses		463,000			113,000			199,000			151,000
Contribution margin		465,000			156,000			205,000			104,000
Fixed expenses:
Advertising, traceable		70,100			8,500			41,000			20,600
Depreciation of special equipment		43,500			20,400			7,600			15,500
Salaries of product-line managers		115,200			40,200			38,200			36,800
Allocated common fixed expenses*		185,600			53,800			80,800			51,000
Total fixed expenses		414,400			122,900			167,600			123,900
Net operating income (loss)	$	50,600		$	33,100		$	37,400		$	(19,900)

*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.