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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	$ 924,000	$ 266,000	$ 404,000	$ 254,000
Variable manufacturing and selling expenses	471,000	118,000	193,000	160,000
Contribution margin	453,000	148,000	211,000	94,000
Fixed expenses:
Advertising, traceable	69,600	8,400	40,300	20,900
Depreciation of special equipment	43,600	20,400	7,700	15,500
Salaries of product-line managers	114,200	40,300	38,400	35,500
Allocated common fixed expenses*	184,800	53,200	80,800	50,800
Total fixed expenses	412,200	122,300	167,200	122,700
Net operating income (loss)	$ 40,800	$ 25,700	$ 43,800	$ (28,700)

*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.

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