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 $ $930,000$ $ $267,000$ $ $410,000$ $ $253,000$

Variable manufacturing and selling expenses $480,000120,000202,000158,000$

Contribution margin $450,000147,000208,00095,000$

Fixed expenses:

Advertising, traceable $69,8008,50040,80020,500$

Depreciation of special equipment $43,90021,0007,70015,200$

Salaries of product$-$line managers $113,70040,40038,30035,000$

Allocated common fixed expenses$*186,00053,40082,00050,600$

Total fixed expenses $413,400123,300168,800121,300$

Net operating income $($loss$)$ $ $36,600$ $ $23,700$ $ $39,200$ $ $(26,300)$

$*$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.