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		$	264,000		$	403,000		$	254,000
Variable manufacturing and selling expenses		469,000			112,000			200,000			157,000
Contribution margin		452,000			152,000			203,000			97,000
Fixed expenses:
Advertising, traceable		69,200			8,700			40,300			20,200
Depreciation of special equipment		42,800			20,300			7,400			15,100
Salaries of product-line managers		114,300			40,200			38,900			35,200
Allocated common fixed expenses*		184,200			52,800			80,600			50,800
Total fixed expenses		410,500			122,000			167,200			121,300
Net operating income (loss)	$	41,500		$	30,000		$	35,800		$	(24,300)

*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.