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	$ 931,000	$ 268,000	$ 406,000	$ 257,000
Variable manufacturing and selling expenses	465,000	117,000	193,000	155,000
Contribution margin	466,000	151,000	213,000	102,000
Fixed expenses:
Advertising, traceable	69,200	8,500	40,500	20,200
Depreciation of special equipment	43,900	20,800	7,600	15,500
Salaries of product-line managers	115,000	40,200	38,900	35,900
Allocated common fixed expenses*	186,200	53,600	81,200	51,400
Total fixed expenses	414,300	123,100	168,200	123,000
Net operating income (loss)	$ 51,700	$ 27,900	$ 44,800	$ (21,000)

*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.