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$932,000$268,000$408,000$256,000Variable manufacturing and selling expenses469,000115,000197,000157,000Contribution margin463,000153,000211,00099,000Fixed expenses:Advertising, traceable70,4008,90040,60020,900Depreciation of special equipment44,00020,4007,90015,700Salaries of product-line managers115,10040,50038,20036,400Allocated common fixed expenses*186,40053,60081,60051,200Total fixed expenses415,900123,400168,300124,200Net operating income (loss)$47,100$29,600$42,700$(25,200)

*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 properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines.