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	$ 920,000	$ 266,000	$ 401,000	$ 253,000
Variable manufacturing and selling expenses	463,000	115,000	198,000	150,000
Contribution margin	457,000	151,000	203,000	103,000
Fixed expenses:
Advertising, traceable	69,900	9,000	40,300	20,600
Depreciation of special equipment	44,200	20,300	8,000	15,900
Salaries of product-line managers	115,400	40,800	38,300	36,300
Allocated common fixed expenses*	184,000	53,200	80,200	50,600
Total fixed expenses	413,500	123,300	166,800	123,400
Net operating income (loss)	$ 43,500	$ 27,700	$ 36,200	$ (20,400)

*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.