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 $ $921,000$ $ $263,000$ $ $403,000$ $ $255,000$

Variable manufacturing and selling expenses $470,000112,000199,000159,000$

Contribution margin $451,000151,000204,00096,000$

Fixed expenses:

Advertising, traceable $69,3008,30040,70020,300$

Depreciation of special equipment $43,00020,2007,70015,100$

Salaries of product$-$line managers $114,50040,50038,70035,300$

Allocated common fixed expenses$*184,20052,60080,60051,000$

Total fixed expenses $411,000121,600167,700121,700$

Net operating income $($loss$)$ $ $40,000$ $ $29,400$ $ $36,300$ $ $(25,700)$

$*$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.