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 $ 936,000 $ 267,000 $ 410,000 $ 259,000 Variable manufacturing and selling expenses 476,000 120,000 198,000 158,000 Contribution margin 460,000 147,000 212,000 101,000 Fixed expenses: Advertising, traceable 70,000 9,000 40,800 20,200 Depreciation of special equipment 43,900 20,300 7,800 15,800 Salaries of product-line managers 114,800 40,500 38,800 35,500 Allocated common fixed expenses* 187,200 53,400 82,000 51,800 Total fixed expenses 415,900 123,200 169,400 123,300 Net operating income (loss) $ 44,100 $ 23,800 $ 42,600 $ (22,300) *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.