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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	$	925,000		$	266,000		$	407,000		$	252,000
Variable manufacturing and selling expenses		465,000			112,000			201,000			152,000
Contribution margin		460,000			154,000			206,000			100,000
Fixed expenses:
Advertising, traceable		69,900			8,900			40,400			20,600
Depreciation of special equipment		44,400			20,600			7,800			16,000
Salaries of product-line managers		115,400			41,000			38,500			35,900
Allocated common fixed expenses*		185,000			53,200			81,400			50,400
Total fixed expenses		414,700			123,700			168,100			122,900
Net operating income (loss)	$	45,300		$	30,300		$	37,900		$	(22,900)

*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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