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	$	925,000		$	267,000		$	403,000		$	255,000
Variable manufacturing and selling expenses		478,000			118,000			205,000			155,000
Contribution margin		447,000			149,000			198,000			100,000
Fixed expenses:
Advertising, traceable		69,600			8,500			40,600			20,500
Depreciation of special equipment		43,600			20,100			7,700			15,800
Salaries of product-line managers		114,900			40,100			38,600			36,200
Allocated common fixed expenses*		185,000			53,400			80,600			51,000
Total fixed expenses		413,100			122,100			167,500			123,500
Net operating income (loss)	$	33,900		$	26,900		$	30,500		$	(23,500)

*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.