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	$	919,000		$	262,000		$	405,000		$	252,000
Variable manufacturing and selling expenses		462,000			111,000			200,000			151,000
Contribution margin		457,000			151,000			205,000			101,000
Fixed expenses:
Advertising, traceable		69,300			8,900			40,100			20,300
Depreciation of special equipment		43,700			20,400			7,800			15,500
Salaries of product-line managers		114,300			40,000			39,000			35,300
Allocated common fixed expenses*		183,800			52,400			81,000			50,400
Total fixed expenses		411,100			121,700			167,900			121,500
Net operating income (loss)	$	45,900		$	29,300		$	37,100		$	(20,500)

*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.