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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	$	929,000		$	266,000		$	403,000		$	260,000
Variable manufacturing and selling expenses		471,000			118,000			194,000			159,000
Contribution margin		458,000			148,000			209,000			101,000
Fixed expenses:
Advertising, traceable		69,200			8,400			40,300			20,500
Depreciation of special equipment		43,600			20,400			7,700			15,500
Salaries of product-line managers		115,100			40,400			38,100			36,600
Allocated common fixed expenses*		185,800			53,200			80,600			52,000
Total fixed expenses		413,700			122,400			166,700			124,600
Net operating income (loss)	$	44,300		$	25,600		$	42,300		$	(23,600)

*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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