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	$ 933,000	$ 268,000	$ 410,000	$ 255,000
Variable manufacturing and selling expenses	473,000	118,000	202,000	153,000
Contribution margin	460,000	150,000	208,000	102,000
Fixed expenses:
Advertising, traceable	69,800	8,700	40,700	20,400
Depreciation of special equipment	44,300	20,500	7,900	15,900
Salaries of product-line managers	115,000	40,700	38,400	35,900
Allocated common fixed expenses*	186,600	53,600	82,000	51,000
Total fixed expenses	415,700	123,500	169,000	123,200
Net operating income (loss)	$ 44,300	$ 26,500	$ 39,000	$ (21,200)

*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.