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	$ 936,000	$ 269,000	$ 408,000	$ 259,000
Variable manufacturing and selling expenses	474,000	118,000	203,000	153,000
Contribution margin	462,000	151,000	205,000	106,000
Fixed expenses:
Advertising, traceable	70,400	8,500	41,000	20,900
Depreciation of special equipment	43,200	20,100	7,100	16,000
Salaries of product-line managers	116,000	40,300	38,800	36,900
Allocated common fixed expenses*	187,200	53,800	81,600	51,800
Total fixed expenses	416,800	122,700	168,500	125,600
Net operating income (loss)	$ 45,200	$ 28,300	$ 36,500	$ (19,600)

*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.