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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	$ 923,000	$ 261,000	$ 410,000	$ 252,000
Variable manufacturing and selling expenses	479,000	118,000	204,000	157,000
Contribution margin	444,000	143,000	206,000	95,000
Fixed expenses:
Advertising, traceable	70,100	8,800	40,400	20,900
Depreciation of special equipment	44,100	20,900	7,300	15,900
Salaries of product-line managers	113,800	40,500	38,200	35,100
Allocated common fixed expenses*	184,600	52,200	82,000	50,400
Total fixed expenses	412,600	122,400	167,900	122,300
Net operating income (loss)	$ 31,400	$ 20,600	$ 38,100	$ (27,300)

*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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