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	$ 924,000	$ 267,000	$ 405,000	$ 252,000
Variable manufacturing and selling expenses	477,000	113,000	206,000	158,000
Contribution margin	447,000	154,000	199,000	94,000
Fixed expenses:
Advertising, traceable	68,700	8,200	40,400	20,100
Depreciation of special equipment	44,500	20,600	7,900	16,000
Salaries of product-line managers	115,000	40,800	38,500	35,700
Allocated common fixed expenses*	184,800	53,400	81,000	50,400
Total fixed expenses	413,000	123,000	167,800	122,200
Net operating income (loss)	$ 34,000	$ 31,000	$ 31,200	$ (28,200)

*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.