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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	$ 923,000	$ 262,000	$ 402,000	$ 259,000
Variable manufacturing and selling expenses	476,000	118,000	207,000	151,000
Contribution margin	447,000	144,000	195,000	108,000
Fixed expenses:
Advertising, traceable	69,400	8,300	40,500	20,600
Depreciation of special equipment	44,100	20,200	8,000	15,900
Salaries of product-line managers	114,400	40,200	38,100	36,100
Allocated common fixed expenses*	184,600	52,400	80,400	51,800
Total fixed expenses	412,500	121,100	167,000	124,400
Net operating income (loss)	$ 34,500	$ 22,900	$ 28,000	$ (16,400)

*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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