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:

Sales$924,000 $264,000 $409,000 $251,000 Variable manufacturing and selling expenses 470,000 117,000 195,000 158,000 Contribution margin 454,000 147,000 214,000 93,000 Fixed expenses: Advertising, traceable 70,600 8,900 40,900 20,800 Depreciation of special equipment 44,000 21,000 7,600 15,400 Salaries of product-line managers 113,800 40,000 38,000 35,800 Allocated common fixed expenses* 184,800 52,800 81,800 50,200 Total fixed expenses 413,200 122,700 168,300 122,200 Net operating income (loss)$40,800 $24,300 $45,700 $(29,200)

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.