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 $ $925,000$ $ $267,000$ $ $406,000$ $ $252,000$

Variable manufacturing and selling expenses $475,000110,000209,000156,000$

Contribution margin $450,000157,000197,00096,000$

Fixed expenses:

Advertising, traceable $70,1008,50041,00020,600$

Depreciation of special equipment $43,30020,1007,80015,400$

Salaries of product$-$line managers $115,20040,90038,20036,100$

Allocated common fixed expenses$*185,00053,40081,20050,400$

Total fixed expenses $413,600122,900168,200122,500$

Net operating income $($loss$)$ $ $36,400$ $ $34,100$ $ $28,800$ $ $(26,500)$

$*$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.