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	$	933,000		$	269,000		$	404,000		$	260,000
Variable manufacturing and selling expenses		460,000			110,000			199,000			151,000
Contribution margin		473,000			159,000			205,000			109,000
Fixed expenses:
Advertising, traceable		69,900			9,000			40,500			20,400
Depreciation of special equipment		43,400			20,400			7,100			15,900
Salaries of product-line managers		114,700			40,100			38,900			35,700
Allocated common fixed expenses*		186,600			53,800			80,800			52,000
Total fixed expenses		414,600			123,300			167,300			124,000
Net operating income (loss)	$	58,400		$	35,700		$	37,700		$	(15,000)

*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.