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	$	925,000		$	265,000		$	402,000		$	258,000
Variable manufacturing and selling expenses		469,000			110,000			200,000			159,000
Contribution margin		456,000			155,000			202,000			99,000
Fixed expenses:
Advertising, traceable		69,700			8,900			40,500			20,300
Depreciation of special equipment		43,600			20,500			7,300			15,800
Salaries of product-line managers		114,400			40,100			38,800			35,500
Allocated common fixed expenses*		185,000			53,000			80,400			51,600
Total fixed expenses		412,700			122,500			167,000			123,200
Net operating income (loss)	$	43,300		$	32,500		$	35,000		$	(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.