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	$ 926,000	$ 266,000	$ 401,000	$ 259,000
Variable manufacturing and selling expenses	467,000	111,000	203,000	153,000
Contribution margin	459,000	155,000	198,000	106,000
Fixed expenses:
Advertising, traceable	70,300	8,700	40,800	20,800
Depreciation of special equipment	43,700	20,400	7,300	16,000
Salaries of product-line managers	114,300	40,100	38,700	35,500
Allocated common fixed expenses*	185,200	53,200	80,200	51,800
Total fixed expenses	413,500	122,400	167,000	124,100
Net operating income (loss)	$ 45,500	$ 32,600	$ 31,000	$ (18,100)

*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.