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		$	407,000		$	257,000
Variable manufacturing and selling expenses		464,000			111,000			193,000			160,000
Contribution margin		469,000			158,000			214,000			97,000
Fixed expenses:
Advertising, traceable		69,700			8,900			40,300			20,500
Depreciation of special equipment		42,900			20,200			7,400			15,300
Salaries of product-line managers		114,400			40,400			38,400			35,600
Allocated common fixed expenses*		186,600			53,800			81,400			51,400
Total fixed expenses		413,600			123,300			167,500			122,800
Net operating income (loss)	$	55,400		$	34,700		$	46,500		$	(25,800)

*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.