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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	$	932,000		$	269,000		$	404,000		$	259,000
Variable manufacturing and selling expenses		475,000			120,000			195,000			160,000
Contribution margin		457,000			149,000			209,000			99,000
Fixed expenses:
Advertising, traceable		69,500			8,400			40,300			20,800
Depreciation of special equipment		43,700			20,800			7,300			15,600
Salaries of product-line managers		116,000			40,900			38,400			36,700
Allocated common fixed expenses*		186,400			53,800			80,800			51,800
Total fixed expenses		415,600			123,900			166,800			124,900
Net operating income (loss)	$	41,400		$	25,100		$	42,200		$	(25,900)

*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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