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	$ 930,000	$ 265,000	$ 407,000	$ 258,000
Variable manufacturing and selling expenses	456,000	112,000	190,000	154,000
Contribution margin	474,000	153,000	217,000	104,000
Fixed expenses:
Advertising, traceable	69,500	8,400	40,600	20,500
Depreciation of special equipment	44,100	20,500	7,800	15,800
Salaries of product-line managers	114,300	40,800	38,100	35,400
Allocated common fixed expenses*	186,000	53,000	81,400	51,600
Total fixed expenses	413,900	122,700	167,900	123,300
Net operating income (loss)	$ 60,100	$ 30,300	$ 49,100	$ (19,300)

*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.