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	$ 917,000	$ 261,000	$ 403,000	$ 253,000
Variable manufacturing and selling expenses	473,000	118,000	205,000	150,000
Contribution margin	444,000	143,000	198,000	103,000
Fixed expenses:
Advertising, traceable	69,600	8,600	40,500	20,500
Depreciation of special equipment	43,900	20,600	7,800	15,500
Salaries of product-line managers	114,900	40,700	38,500	35,700
Allocated common fixed expenses*	183,400	52,200	80,600	50,600
Total fixed expenses	411,800	122,100	167,400	122,300
Net operating income (loss)	$ 32,200	$ 20,900	$ 30,600	$ (19,300)

*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.