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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	$	932,000		$	269,000		$	406,000		$	257,000
Variable manufacturing and selling expenses		481,000			117,000			210,000			154,000
Contribution margin		451,000			152,000			196,000			103,000
Fixed expenses:
Advertising, traceable		70,700			8,900			40,900			20,900
Depreciation of special equipment		44,300			20,800			7,600			15,900
Salaries of product-line managers		115,000			40,100			38,400			36,500
Allocated common fixed expenses*		186,400			53,800			81,200			51,400
Total fixed expenses		416,400			123,600			168,100			124,700
Net operating income (loss)	$	34,600		$	28,400		$	27,900		$	(21,700)

*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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