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 $ $927,000$ $ $268,000$ $ $400,000$ $ $259,000$

Variable manufacturing and selling expenses $464,000115,000192,000157,000$

Contribution margin $463,000153,000208,000102,000$

Fixed expenses:

Advertising, traceable $69,3008,20040,30020,800$

Depreciation of special equipment $43,50020,2007,50015,800$

Salaries of product$-$line managers $114,80040,30038,40036,100$

Allocated common fixed expenses$*185,40053,60080,00051,800$

Total fixed expenses $413,000122,300166,200124,500$

Net operating income $($loss$)$ $ $50,000$ $ $30,700$ $ $41,800$ $ $(22,500)$

$*$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.