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	$ 928,000	$ 261,000	$ 410,000	$ 257,000
Variable manufacturing and selling expenses	471,000	113,000	205,000	153,000
Contribution margin	457,000	148,000	205,000	104,000
Fixed expenses:
Advertising, traceable	69,800	8,300	40,900	20,600
Depreciation of special equipment	43,800	20,700	7,400	15,700
Salaries of product-line managers	114,700	40,000	38,900	35,800
Allocated common fixed expenses*	185,600	52,200	82,000	51,400
Total fixed expenses	413,900	121,200	169,200	123,500
Net operating income (loss)	$ 43,100	$ 26,800	$ 35,800	$ (19,500)

*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.