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	$ 269,000	$ 406,000	$ 255,000
Variable manufacturing and selling expenses	464,000	113,000	191,000	160,000
Contribution margin	466,000	156,000	215,000	95,000
Fixed expenses:
Advertising, traceable	69,400	8,200	40,600	20,600
Depreciation of special equipment	43,400	20,600	7,600	15,200
Salaries of product-line managers	115,000	40,100	38,600	36,300
Allocated common fixed expenses*	186,000	53,800	81,200	51,000
Total fixed expenses	413,800	122,700	168,000	123,100
Net operating income (loss)	$ 52,200	$ 33,300	$ 47,000	$ (28,100)

*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.