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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	$ 929,000	$ 269,000	$ 406,000	$ 254,000
Variable manufacturing and selling expenses	465,000	113,000	194,000	158,000
Contribution margin	464,000	156,000	212,000	96,000
Fixed expenses:
Advertising, traceable	70,100	8,800	40,300	21,000
Depreciation of special equipment	42,700	20,200	7,200	15,300
Salaries of product-line managers	116,000	40,600	38,400	37,000
Allocated common fixed expenses*	185,800	53,800	81,200	50,800
Total fixed expenses	414,600	123,400	167,100	124,100
Net operating income (loss)	$ 49,400	$ 32,600	$ 44,900	$ (28,100)

*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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