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 $ $923,000$ $ $269,000$ $ $404,000$ $ $250,000$

Variable manufacturing and selling expenses $469,000118,000198,000153,000$

Contribution margin $454,000151,000206,00097,000$

Fixed expenses:

Advertising, traceable $69,5008,30040,70020,500$

Depreciation of special equipment $43,20020,5007,50015,200$

Salaries of product$-$line managers $115,80040,00038,80037,000$

Allocated common fixed expenses$*184,60053,80080,80050,000$

Total fixed expenses $413,100122,600167,800122,700$

Net operating income $($loss$)$ $ $40,900$ $ $28,400$ $ $38,200$ $ $(25,700)$

$*$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.