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	$ 922,000	$ 263,000	$ 404,000	$ 255,000
Variable manufacturing and selling expenses	472,000	111,000	204,000	157,000
Contribution margin	450,000	152,000	200,000	98,000
Fixed expenses:
Advertising, traceable	70,000	8,200	40,900	20,900
Depreciation of special equipment	43,500	20,700	7,300	15,500
Salaries of product-line managers	114,100	40,100	38,100	35,900
Allocated common fixed expenses*	184,400	52,600	80,800	51,000
Total fixed expenses	412,000	121,600	167,100	123,300
Net operating income (loss)	$ 38,000	$ 30,400	$ 32,900	$ (25,300)

*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.