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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	$	931,000		$	268,000		$	408,000		$	255,000
Variable manufacturing and selling expenses		461,000			116,000			191,000			154,000
Contribution margin		470,000			152,000			217,000			101,000
Fixed expenses:
Advertising, traceable		69,200			8,600			40,500			20,100
Depreciation of special equipment		43,000			20,400			7,200			15,400
Salaries of product-line managers		115,900			40,700			38,900			36,300
Allocated common fixed expenses*		186,200			53,600			81,600			51,000
Total fixed expenses		414,300			123,300			168,200			122,800
Net operating income (loss)	$	55,700		$	28,700		$	48,800		$	(21,800)

*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?(yes/no)

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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