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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	$	933,000		$	264,000		$	410,000		$	259,000
Variable manufacturing and selling expenses		473,000			118,000			198,000			157,000
Contribution margin		460,000			146,000			212,000			102,000
Fixed expenses:
Advertising, traceable		69,800			8,200			41,000			20,600
Depreciation of special equipment		43,800			20,700			7,200			15,900
Salaries of product-line managers		114,500			40,100			38,500			35,900
Allocated common fixed expenses*		186,600			52,800			82,000			51,800
Total fixed expenses		414,700			121,800			168,700			124,200
Net operating income (loss)	$	45,300		$	24,200		$	43,300		$	(22,200)

*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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