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	$ 928,000	$ 266,000	$ 406,000	$ 256,000
Variable manufacturing and selling expenses	464,000	114,000	198,000	152,000
Contribution margin	464,000	152,000	208,000	104,000
Fixed expenses:
Advertising, traceable	70,100	8,900	40,700	20,500
Depreciation of special equipment	43,800	20,800	7,200	15,800
Salaries of product-line managers	115,900	40,800	38,100	37,000
Allocated common fixed expenses*	185,600	53,200	81,200	51,200
Total fixed expenses	415,400	123,700	167,200	124,500
Net operating income (loss)	$ 48,600	$ 28,300	$ 40,800	$ (20,500)

*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.

	Totals	Dirt Bikes	Mountain Bikes	Racing Bikes
Sales
Variable manufacturing and selling expenses
Contribution margin (loss)	0	0	0	0
Traceable fixed expenses:
Advertising, traceable
Depreciation of special equipment
Common fixed expenses
Total traceable fixed expenses	0	0	0	0
Product line segment margin (loss)	0	$0	$0	$0
Salaries of the product line managers
Net operating income (loss)	$0