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	$ 922,000	$ 267,000	$ 401,000	$ 254,000
Variable manufacturing and selling expenses	459,000	114,000	191,000	154,000
Contribution margin	463,000	153,000	210,000	100,000
Fixed expenses:
Advertising, traceable	69,200	8,300	40,600	20,300
Depreciation of special equipment	44,100	20,600	8,000	15,500
Salaries of product-line managers	114,200	40,600	38,200	35,400
Allocated common fixed expenses*	184,400	53,400	80,200	50,800
Total fixed expenses	411,900	122,900	167,000	122,000
Net operating income (loss)	$ 51,100	$ 30,100	$ 43,000	$ (22,000)

*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.

	Totals	Dirt Bikes	Mountain Bikes	Racing Bikes
Contribution margin (loss)
Traceable fixed expenses:
Total traceable fixed expenses
Product line segment margin (loss)
Net operating income (loss)