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 $ $927,000$ $ $267,000$ $ $401,000$ $ $259,000$

Variable manufacturing and selling expenses $456,000114,000191,000151,000$

Contribution margin $471,000153,000210,000108,000$

Fixed expenses:

Advertising, traceable $69,5008,50040,70020,300$

Depreciation of special equipment $43,40020,4007,90015,100$

Salaries of product$-$line managers $115,30040,40038,40036,500$

Allocated common fixed expenses$*185,40053,40080,20051,800$

Total fixed expenses $413,600122,700167,200123,700$

Net operating income $($loss$)$ $ $57,400$ $ $30,300$ $ $42,800$ $ $(15,700)$

$*$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.

Required $2$

Required $3$

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.