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:

Sales	$	921,000		$	265,000		$	404,000		$	252,000
Variable manufacturing and selling expenses		471,000			117,000			198,000			156,000
Contribution margin		450,000			148,000			206,000			96,000
Fixed expenses:
Advertising, traceable		69,700			8,600			40,500			20,600
Depreciation of special equipment		44,500			20,900			7,800			15,800
Salaries of product-line managers		115,500			40,400			38,800			36,300
Allocated common fixed expenses*		184,200			53,000			80,800			50,400
Total fixed expenses		413,900			122,900			167,900			123,100
Net operating income (loss)	$	36,100		$	25,100		$	38,100		$	(27,100)

*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.