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$ 921,000$ 263,000$ 401,000$ 257,000Variable manufacturing and selling expenses469,000117,000200,000152,000Contribution margin452,000146,000201,000105,000Fixed expenses: Advertising, traceable69,4008,50040,40020,500Depreciation of special equipment44,00020,5007,50016,000Salaries of product-line managers115,90040,40038,60036,900Allocated common fixed expenses*184,20052,60080,20051,400Total fixed expenses413,500122,000166,700124,800Net operating income (loss)$ 38,500$ 24,000$ 34,300$ (19,800)

*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.