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$ 922,000$ 264,000$ 404,000$ 254,000Variable manufacturing and selling expenses483,000117,000206,000160,000Contribution margin439,000147,000198,00094,000Fixed expenses: Advertising, traceable69,8008,80040,70020,300Depreciation of special equipment43,40021,0007,20015,200Salaries of product-line managers114,90040,20038,00036,700Allocated common fixed expenses*184,40052,80080,80050,800Total fixed expenses412,500122,800166,700123,000Net operating income (loss)$ 26,500$ 24,200$ 31,300$ (29,000)

*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.