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	$ 921,000	$ 263,000	$ 402,000	$ 256,000
Variable manufacturing and selling expenses	474,000	118,000	203,000	153,000
Contribution margin	447,000	145,000	199,000	103,000
Fixed expenses:
Advertising, traceable	69,300	8,200	40,600	20,500
Depreciation of special equipment	43,900	20,300	7,900	15,700
Salaries of product-line managers	115,700	40,500	38,900	36,300
Allocated common fixed expenses*	184,200	52,600	80,400	51,200
Total fixed expenses	413,100	121,600	167,800	123,700
Net operating income (loss)	$ 33,900	$ 23,400	$ 31,200	$ (20,700)

*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.