he 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:

TotalDirt BikesMountain BikesRacing BikesSales$ 930,000$ 267,000$ 409,000$ 254,000Variable manufacturing and selling expenses482,000119,000210,000153,000Contribution margin448,000148,000199,000101,000Fixed expenses: Advertising, traceable69,6008,30040,80020,500Depreciation of special equipment43,60021,0007,20015,400Salaries of product-line managers116,60040,80038,90036,900Allocated common fixed expenses*186,00053,40081,80050,800Total fixed expenses415,800123,500168,700123,600Net operating income (loss)$ 32,200$ 24,500$ 30,300$ (22,600)

*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.