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	$ 916,000	$ 261,000	$ 402,000	$ 253,000
Variable manufacturing and selling expenses	463,000	110,000	199,000	154,000
Contribution margin	453,000	151,000	203,000	99,000
Fixed expenses:
Advertising, traceable	69,600	8,500	40,300	20,800
Depreciation of special equipment	43,700	20,400	7,900	15,400
Salaries of product-line managers	116,500	41,000	38,600	36,900
Allocated common fixed expenses*	183,200	52,200	80,400	50,600
Total fixed expenses	413,000	122,100	167,200	123,700
Net operating income (loss)	$ 40,000	$ 28,900	$ 35,800	$ (24,700)

*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.