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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	$	915,000		$	262,000		$	401,000		$	252,000
Variable manufacturing and selling expenses		464,000			119,000			192,000			153,000
Contribution margin		451,000			143,000			209,000			99,000
Fixed expenses:
Advertising, traceable		69,800			8,500			41,000			20,300
Depreciation of special equipment		44,200			20,700			7,900			15,600
Salaries of product-line managers		114,100			40,800			38,200			35,100
Allocated common fixed expenses*		183,000			52,400			80,200			50,400
Total fixed expenses		411,100			122,400			167,300			121,400
Net operating income (loss)	$	39,900		$	20,600		$	41,700		$	(22,400)

*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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