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$ 921,000$ 268,000$ 401,000$ 252,000Variable manufacturing and selling expenses466,000111,000195,000160,000Contribution margin455,000157,000206,00092,000Fixed expenses: Advertising, traceable70,6008,80040,80021,000Depreciation of special equipment42,70020,2007,30015,200Salaries of product-line managers115,00040,80038,40035,800Allocated common fixed expenses*184,20053,60080,20050,400Total fixed expenses412,500123,400166,700122,400Net operating income (loss)$ 42,500$ 33,600$ 39,300$ (30,400)

*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.