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	$	932,000		$	270,000		$	407,000		$	255,000
Variable manufacturing and selling expenses		473,000			116,000			200,000			157,000
Contribution margin		459,000			154,000			207,000			98,000
Fixed expenses:
Advertising, traceable		69,400			8,400			40,200			20,800
Depreciation of special equipment		43,600			20,600			7,400			15,600
Salaries of product-line managers		114,000			40,000			38,400			35,600
Allocated common fixed expenses*		186,400			54,000			81,400			51,000
Total fixed expenses		413,400			123,000			167,400			123,000
Net operating income (loss)	$	45,600		$	31,000		$	39,600		$	(25,000)

*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.