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	$	918,000		$	267,000		$	400,000		$	251,000
Variable manufacturing and selling expenses		464,000			118,000			194,000			152,000
Contribution margin		454,000			149,000			206,000			99,000
Fixed expenses:
Advertising, traceable		69,500			8,400			40,800			20,300
Depreciation of special equipment		43,800			20,200			8,000			15,600
Salaries of product-line managers		115,600			40,000			38,700			36,900
Allocated common fixed expenses*		183,600			53,400			80,000			50,200
Total fixed expenses		412,500			122,000			167,500			123,000
Net operating income (loss)	$	41,500		$	27,000		$	38,500		$	(24,000)

*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.