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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	$	937,000		$	270,000		$	409,000		$	258,000
Variable manufacturing and selling expenses		463,000			111,000			194,000			158,000
Contribution margin		474,000			159,000			215,000			100,000
Fixed expenses:
Advertising, traceable		70,200			8,600			40,800			20,800
Depreciation of special equipment		43,700			20,400			7,800			15,500
Salaries of product-line managers		115,800			40,600			38,900			36,300
Allocated common fixed expenses*		187,400			54,000			81,800			51,600
Total fixed expenses		417,100			123,600			169,300			124,200
Net operating income (loss)	$	56,900		$	35,400		$	45,700		$	(24,200)

*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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