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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	$ 922,000	$ 263,000	$ 408,000	$ 251,000
Variable manufacturing and selling expenses	455,000	112,000	191,000	152,000
Contribution margin	467,000	151,000	217,000	99,000
Fixed expenses:
Advertising, traceable	69,100	8,400	40,200	20,500
Depreciation of special equipment	42,900	20,100	7,300	15,500
Salaries of product-line managers	114,500	40,600	38,300	35,600
Allocated common fixed expenses*	184,400	52,600	81,600	50,200
Total fixed expenses	410,900	121,700	167,400	121,800
Net operating income (loss)	$ 56,100	$ 29,300	$ 49,600	$ (22,800)

*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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