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		$	264,000		$	404,000		$	259,000
Variable manufacturing and selling expenses		468,000			114,000			195,000			159,000
Contribution margin		459,000			150,000			209,000			100,000
Fixed expenses:
Advertising, traceable		69,200			8,500			40,200			20,500
Depreciation of special equipment		43,300			20,100			7,500			15,700
Salaries of product-line managers		114,300			40,800			38,400			35,100
Allocated common fixed expenses*		185,400			52,800			80,800			51,800
Total fixed expenses		412,200			122,200			166,900			123,100
Net operating income (loss)	$	46,800		$	27,800		$	42,100		$	(23,100)

*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.