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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	$	925,000		$	264,000		$	405,000		$	256,000
Variable manufacturing and selling expenses		465,000			111,000			195,000			159,000
Contribution margin		460,000			153,000			210,000			97,000
Fixed expenses:
Advertising, traceable		69,600			8,600			40,100			20,900
Depreciation of special equipment		44,200			20,900			7,500			15,800
Salaries of product-line managers		113,500			40,000			38,400			35,100
Allocated common fixed expenses*		185,000			52,800			81,000			51,200
Total fixed expenses		412,300			122,300			167,000			123,000
Net operating income (loss)	$	47,700		$	30,700		$	43,000		$	(26,000)

*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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