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	$	921,000		$	267,000		$	403,000		$	251,000
Variable manufacturing and selling expenses		484,000			116,000			209,000			159,000
Contribution margin		437,000			151,000			194,000			92,000
Fixed expenses:
Advertising, traceable		69,700			8,400			40,600			20,700
Depreciation of special equipment		43,100			20,100			7,800			15,200
Salaries of product-line managers		114,900			40,500			38,900			35,500
Allocated common fixed expenses*		184,200			53,400			80,600			50,200
Total fixed expenses		411,900			122,400			167,900			121,600
Net operating income (loss)	$	25,100		$	28,600		$	26,100		$	(29,600)

*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.