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	$ 925,000	$ 263,000	$ 405,000	$ 257,000
Variable manufacturing and selling expenses	462,000	117,000	192,000	153,000
Contribution margin	463,000	146,000	213,000	104,000
Fixed expenses:
Advertising, traceable	69,100	8,500	40,200	20,400
Depreciation of special equipment	44,200	20,500	7,800	15,900
Salaries of product-line managers	116,300	41,000	38,400	36,900
Allocated common fixed expenses*	185,000	52,600	81,000	51,400
Total fixed expenses	414,600	122,600	167,400	124,600
Net operating income (loss)	$ 48,400	$ 23,400	$ 45,600	$ (20,600)

*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.