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 $ 926,000 $ 266,000 $ 409,000 $ 251,000 Variable manufacturing and selling expenses 477,000 113,000 205,000 159,000 Contribution margin 449,000 153,000 204,000 92,000 Fixed expenses: Advertising, traceable 69,100 8,600 40,100 20,400 Depreciation of special equipment 43,400 20,300 7,700 15,400 Salaries of product-line managers 113,200 40,100 38,000 35,100 Allocated common fixed expenses* 185,200 53,200 81,800 50,200 Total fixed expenses 410,900 122,200 167,600 121,100 Net operating income (loss) $ 38,100 $ 30,800 $ 36,400 $ (29,100) *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.