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$ 925,000$ 264,000$ 407,000$ 254,000Variable manufacturing and selling expenses470,000111,000201,000158,000Contribution margin455,000153,000206,00096,000Fixed expenses: Advertising, traceable70,2008,60040,90020,700Depreciation of special equipment43,80020,6007,60015,600Salaries of product-line managers115,00040,00038,40036,600Allocated common fixed expenses*185,00052,80081,40050,800Total fixed expenses414,000122,000168,300123,700Net operating income (loss)$ 41,000$ 31,000$ 37,700$ (27,700)

*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.