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		$	266,000		$	409,000		$	252,000
Variable manufacturing and selling expenses		461,000			114,000			192,000			155,000
Contribution margin		466,000			152,000			217,000			97,000
Fixed expenses:
Advertising, traceable		69,600			8,500			40,500			20,600
Depreciation of special equipment		43,400			20,500			7,800			15,100
Salaries of product-line managers		114,300			40,400			38,800			35,100
Allocated common fixed expenses*		185,400			53,200			81,800			50,400
Total fixed expenses		412,700			122,600			168,900			121,200
Net operating income (loss)	$	53,300		$	29,400		$	48,100		$	(24,200)

*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.