The Regal Cycle Company manufactures three types of bicycles$$a 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 $ $932,000$ $ $270,000$ $ $403,000$ $ $259,000$

Variable manufacturing and selling expenses $468,000117,000200,000151,000$

Contribution margin $464,000153,000203,000108,000$

Fixed expenses:

Advertising, traceable $70,3009,00040,60020,700$

Depreciation of special equipment $43,70020,4007,40015,900$

Salaries of product$-$line managers $115,60040,50038,70036,400$

Allocated common fixed expenses$*186,40054,00080,60051,800$

Total fixed expenses $416,000123,900167,300124,800$

Net operating income $($loss$)$ $ $48,000$ $ $29,100$ $ $35,700$ $ $(16,800)$

$*$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.