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	$ 915,000	$ 261,000	$ 404,000	$ 250,000
Variable manufacturing and selling expenses	462,000	112,000	194,000	156,000
Contribution margin	453,000	149,000	210,000	94,000
Fixed expenses:
Advertising, traceable	68,900	8,700	40,100	20,100
Depreciation of special equipment	44,000	20,300	7,800	15,900
Salaries of product-line managers	115,000	40,200	38,300	36,500
Allocated common fixed expenses*	183,000	52,200	80,800	50,000
Total fixed expenses	410,900	121,400	167,000	122,500
Net operating income (loss)	$ 42,100	$ 27,600	$ 43,000	$ (28,500)

*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.