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		$	269,000		$	403,000		$	253,000
Variable manufacturing and selling expenses		474,000			113,000			204,000			157,000
Contribution margin		451,000			156,000			199,000			96,000
Fixed expenses:
Advertising, traceable		69,600			8,100			40,700			20,800
Depreciation of special equipment		43,300			20,800			7,300			15,200
Salaries of product-line managers		114,300			40,500			38,200			35,600
Allocated common fixed expenses*		185,000			53,800			80,600			50,600
Total fixed expenses		412,200			123,200			166,800			122,200
Net operating income (loss)	$	38,800		$	32,800		$	32,200		$	(26,200)

*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.