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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	$ 266,000	$ 406,000	$ 257,000
Variable manufacturing and selling expenses	476,000	119,000	205,000	152,000
Contribution margin	453,000	147,000	201,000	105,000
Fixed expenses:
Advertising, traceable	69,300	8,300	40,300	20,700
Depreciation of special equipment	44,000	20,500	7,800	15,700
Salaries of product-line managers	114,900	40,400	38,500	36,000
Allocated common fixed expenses*	185,800	53,200	81,200	51,400
Total fixed expenses	414,000	122,400	167,800	123,800
Net operating income (loss)	$ 39,000	$ 24,600	$ 33,200	$ (18,800)

*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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