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	$ 264,000	$ 401,000	$ 260,000
Variable manufacturing and selling expenses	468,000	119,000	191,000	158,000
Contribution margin	457,000	145,000	210,000	102,000
Fixed expenses:
Advertising, traceable	69,700	8,200	40,600	20,900
Depreciation of special equipment	44,000	21,000	7,200	15,800
Salaries of product-line managers	114,700	40,800	38,700	35,200
Allocated common fixed expenses*	185,000	52,800	80,200	52,000
Total fixed expenses	413,400	122,800	166,700	123,900
Net operating income (loss)	$ 43,600	$ 22,200	$ 43,300	$ (21,900)

*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.