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 $ $927,000$ $ $268,000$ $ $407,000$ $ $252,000$

Variable manufacturing and selling expenses $462,000119,000193,000150,000$

Contribution margin $465,000149,000214,000102,000$

Fixed expenses:

Advertising, traceable $70,0008,90040,40020,700$

Depreciation of special equipment $43,80020,8007,50015,500$

Salaries of product$-$line managers $115,60040,80038,20036,600$

Allocated common fixed expenses$*185,40053,60081,40050,400$

Total fixed expenses $414,800124,100167,500123,200$

Net operating income $($loss$)$ $ $50,200$ $ $24,900$ $ $46,500$ $ $(21,200)$

$*$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.