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	$ 930,000	$ 269,000	$ 402,000	$ 259,000
Variable manufacturing and selling expenses	475,000	117,000	203,000	155,000
Contribution margin	455,000	152,000	199,000	104,000
Fixed expenses:
Advertising, traceable	70,600	9,000	40,600	21,000
Depreciation of special equipment	43,400	20,400	7,600	15,400
Salaries of product-line managers	115,000	40,400	38,600	36,000
Allocated common fixed expenses*	186,000	53,800	80,400	51,800
Total fixed expenses	415,000	123,600	167,200	124,200
Net operating income (loss)	$ 40,000	$ 28,400	$ 31,800	$ (20,200)

*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.