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:

TotalDirt BikesMountain BikesRacing BikesSales$ 300,000$ 90,000$ 150,000$ 60,000Variable manufacturing and selling expenses120,00027,00060,00033,000Contribution margin180,00063,00090,00027,000Fixed expenses:Advertising, traceable30,00010,00014,0006,000Depreciation of special equipment23,0006,0009,0008,000Salaries of product-line managers35,00012,00013,00010,000Allocated common fixed expenses*Footnote asterisk60,00018,00030,00012,000Total fixed expenses148,00046,00066,00036,000Net operating income (loss)$ 32,000$ 17,000$ 24,000$ (9,000)

*Footnote asteriskAllocated 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.

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