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	$ 925,000	$ 266,000	$ 407,000	$ 252,000
Variable manufacturing and selling expenses	475,000	111,000	205,000	159,000
Contribution margin	450,000	155,000	202,000	93,000
Fixed expenses:
Advertising, traceable	70,500	8,900	40,700	20,900
Depreciation of special equipment	43,800	20,900	7,400	15,500
Salaries of product-line managers	115,300	40,300	38,100	36,900
Allocated common fixed expenses*	185,000	53,200	81,400	50,400
Total fixed expenses	414,600	123,300	167,600	123,700
Net operating income (loss)	$ 35,400	$ 31,700	$ 34,400	$ (30,700)

*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.