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	$ 925,000	$ 266,000	$ 401,000	$ 258,000
Variable manufacturing and selling expenses	475,000	115,000	202,000	158,000
Contribution margin	450,000	151,000	199,000	100,000
Fixed expenses:
Advertising, traceable	68,900	8,200	40,300	20,400
Depreciation of special equipment	44,400	20,900	7,800	15,700
Salaries of product-line managers	114,700	40,900	38,100	35,700
Allocated common fixed expenses*	185,000	53,200	80,200	51,600
Total fixed expenses	413,000	123,200	166,400	123,400
Net operating income (loss)	$ 37,000	$ 27,800	$ 32,600	$ (23,400)

*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.