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	$	927,000		$	269,000		$	407,000		$	251,000
Variable manufacturing and selling expenses		478,000			112,000			207,000			159,000
Contribution margin		449,000			157,000			200,000			92,000
Fixed expenses:
Advertising, traceable		68,900			8,600			40,100			20,200
Depreciation of special equipment		43,300			20,400			7,400			15,500
Salaries of product-line managers		114,200			40,700			38,200			35,300
Allocated common fixed expenses*		185,400			53,800			81,400			50,200
Total fixed expenses		411,800			123,500			167,100			121,200
Net operating income (loss)	$	37,200		$	33,500		$	32,900		$	(29,200)

*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.