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	$ 919,000	$ 261,000	$ 402,000	$ 256,000
Variable manufacturing and selling expenses	483,000	119,000	205,000	159,000
Contribution margin	436,000	142,000	197,000	97,000
Fixed expenses:
Advertising, traceable	70,400	8,600	41,000	20,800
Depreciation of special equipment	43,900	20,500	7,700	15,700
Salaries of product-line managers	114,700	40,700	38,900	35,100
Allocated common fixed expenses*	183,800	52,200	80,400	51,200
Total fixed expenses	412,800	122,000	168,000	122,800
Net operating income (loss)	$ 23,200	$ 20,000	$ 29,000	$ (25,800)

*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.