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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	$ 926,000	$ 270,000	$ 405,000	$ 251,000
Variable manufacturing and selling expenses	467,000	116,000	198,000	153,000
Contribution margin	459,000	154,000	207,000	98,000
Fixed expenses:
Advertising, traceable	70,700	9,000	40,900	20,800
Depreciation of special equipment	43,300	20,300	7,300	15,700
Salaries of product-line managers	115,100	40,400	38,100	36,600
Allocated common fixed expenses*	185,200	54,000	81,000	50,200
Total fixed expenses	414,300	123,700	167,300	123,300
Net operating income (loss)	$ 44,700	$ 30,300	$ 39,700	$ (25,300)

*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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