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	$ 920,000	$ 262,000	$ 408,000	$ 250,000
Variable manufacturing and selling expenses	481,000	116,000	208,000	157,000
Contribution margin	439,000	146,000	200,000	93,000
Fixed expenses:
Advertising, traceable	69,100	8,700	40,200	20,200
Depreciation of special equipment	43,200	20,600	7,200	15,400
Salaries of product-line managers	114,500	40,800	38,400	35,300
Allocated common fixed expenses*	184,000	52,400	81,600	50,000
Total fixed expenses	410,800	122,500	167,400	120,900
Net operating income (loss)	$ 28,200	$ 23,500	$ 32,600	$ (27,900)

*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.