The Regal Cycle Company manufactures three types of bicycles—adirt bike, a mountain bike, and a racing bike. Data on sales andexpenses for the past quarter follow:

	Total			Dirt Bikes			Mountain Bikes			Racing Bikes
Sales	$	928,000		$	270,000		$	402,000		$	256,000
Variable manufacturing and selling expenses		478,000			116,000			208,000			154,000
Contribution margin		450,000			154,000			194,000			102,000
Fixed expenses:
Advertising, traceable		69,300			8,300			40,800			20,200
Depreciation of special equipment		42,900			20,300			7,500			15,100
Salaries of product-line managers		115,400			40,200			38,400			36,800
Allocated common fixed expenses*		185,600			54,000			80,400			51,200
Total fixed expenses		413,200			122,800			167,100			123,300
Net operating income (loss)	$	36,800		$	31,200		$	26,900		$	(21,300)

*Allocated on the basis of sales dollars.

Management is concerned about the continued losses shown by theracing bikes and wants a recommendation as to whether or not theline should be discontinued. The special equipment used to produceracing bikes has no resale value and does not wear out.

Required:

1. What is the financial advantage (disadvantage) per quarter ofdiscontinuing the Racing Bikes?

2. Should the production and sale of racing bikes bediscontinued?

3. Prepare a properly formatted segmented income statement thatwould be more useful to management in assessing the long-runprofitability of the various product lines.