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	$ 264,000	$ 409,000	$ 257,000
Variable manufacturing and selling expenses	474,000	116,000	202,000	156,000
Contribution margin	456,000	148,000	207,000	101,000
Fixed expenses:
Advertising, traceable	70,200	9,000	40,400	20,800
Depreciation of special equipment	43,300	20,300	7,900	15,100
Salaries of product-line managers	115,900	40,700	38,800	36,400
Allocated common fixed expenses*	186,000	52,800	81,800	51,400
Total fixed expenses	415,400	122,800	168,900	123,700
Net operating income (loss)	$ 40,600	$ 25,200	$ 38,100	$ (22,700)

*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.