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:

TotalDirt BikesMountain BikesRacing BikesSales$ 928,000$ 269,000$ 409,000$ 250,000Variable manufacturing and selling expenses463,000111,000194,000158,000Contribution margin465,000158,000215,00092,000Fixed expenses: Advertising, traceable69,8008,70040,20020,900Depreciation of special equipment43,80020,5007,90015,400Salaries of product-line managers114,10040,60038,10035,400Allocated common fixed expenses*185,60053,80081,80050,000Total fixed expenses413,300123,600168,000121,700Net operating income (loss)$ 51,700$ 34,400$ 47,000$ (29,700)

*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.