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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	$	931,000		$	267,000		$	407,000		$	257,000
Variable manufacturing and selling expenses		466,000			110,000			205,000			151,000
Contribution margin		465,000			157,000			202,000			106,000
Fixed expenses:
Advertising, traceable		70,200			9,000			40,300			20,900
Depreciation of special equipment		43,400			20,500			7,400			15,500
Salaries of product-line managers		115,200			40,400			38,000			36,800
Allocated common fixed expenses*		186,200			53,400			81,400			51,400
Total fixed expenses		415,000			123,300			167,100			124,600
Net operating income (loss)	$	50,000		$	33,700		$	34,900		$	(18,600)

*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.