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	$ 930,000	$ 264,000	$ 409,000	$ 257,000
Variable manufacturing and selling expenses	473,000	115,000	201,000	157,000
Contribution margin	457,000	149,000	208,000	100,000
Fixed expenses:
Advertising, traceable	68,900	8,100	40,300	20,500
Depreciation of special equipment	43,400	20,400	7,900	15,100
Salaries of product-line managers	116,700	41,000	38,800	36,900
Allocated common fixed expenses*	186,000	52,800	81,800	51,400
Total fixed expenses	415,000	122,300	168,800	123,900
Net operating income (loss)	$ 42,000	$ 26,700	$ 39,200	$ (23,900)

*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.