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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	$ 914,000	$ 263,000	$ 401,000	$ 250,000
Variable manufacturing and selling expenses	481,000	116,000	207,000	158,000
Contribution margin	433,000	147,000	194,000	92,000
Fixed expenses:
Advertising, traceable	69,500	9,000	40,100	20,400
Depreciation of special equipment	43,900	20,400	8,000	15,500
Salaries of product-line managers	114,600	40,700	38,100	35,800
Allocated common fixed expenses*	182,800	52,600	80,200	50,000
Total fixed expenses	410,800	122,700	166,400	121,700
Net operating income (loss)	$ 22,200	$ 24,300	$ 27,600	$ (29,700)

*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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