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	$ 929,000	$ 266,000	$ 409,000	$ 254,000
Variable manufacturing and selling expenses	468,000	111,000	201,000	156,000
Contribution margin	461,000	155,000	208,000	98,000
Fixed expenses:
Advertising, traceable	68,700	8,200	40,100	20,400
Depreciation of special equipment	43,300	20,800	7,200	15,300
Salaries of product-line managers	114,700	40,000	39,000	35,700
Allocated common fixed expenses*	185,800	53,200	81,800	50,800
Total fixed expenses	412,500	122,200	168,100	122,200
Net operating income (loss)	$ 48,500	$ 32,800	$ 39,900	$ (24,200)

*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.