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	$ 926,000	$ 266,000	$ 402,000	$ 258,000
Variable manufacturing and selling expenses	477,000	116,000	207,000	154,000
Contribution margin	449,000	150,000	195,000	104,000
Fixed expenses:
Advertising, traceable	70,600	8,800	40,900	20,900
Depreciation of special equipment	43,700	20,400	7,600	15,700
Salaries of product-line managers	114,600	40,600	38,300	35,700
Allocated common fixed expenses*	185,200	53,200	80,400	51,600
Total fixed expenses	414,100	123,000	167,200	123,900
Net operating income (loss)	$ 34,900	$ 27,000	$ 27,800	$ (19,900)

*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.