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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	$	921,000		$	268,000		$	402,000		$	251,000
Variable manufacturing and selling expenses		462,000			116,000			191,000			155,000
Contribution margin		459,000			152,000			211,000			96,000
Fixed expenses:
Advertising, traceable		69,400			8,100			40,800			20,500
Depreciation of special equipment		43,700			20,600			7,600			15,500
Salaries of product-line managers		114,500			40,900			38,600			35,000
Allocated common fixed expenses*		184,200			53,600			80,400			50,200
Total fixed expenses		411,800			123,200			167,400			121,200
Net operating income (loss)	$	47,200		$	28,800		$	43,600		$	(25,200)

*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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