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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	$ 265,000	$ 402,000	$ 255,000
Variable manufacturing and selling expenses	478,000	115,000	210,000	153,000
Contribution margin	444,000	150,000	192,000	102,000
Fixed expenses:
Advertising, traceable	69,900	8,400	40,900	20,600
Depreciation of special equipment	43,900	20,600	7,400	15,900
Salaries of product-line managers	114,800	40,100	38,600	36,100
Allocated common fixed expenses*	184,400	53,000	80,400	51,000
Total fixed expenses	413,000	122,100	167,300	123,600
Net operating income (loss)	$ 31,000	$ 27,900	$ 24,700	$ (21,600)

*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.

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