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 $ $917,000$ $ $264,000$ $ $401,000$ $ $252,000$

Variable manufacturing and selling expenses $464,000115,000195,000154,000$

Contribution margin $453,000149,000206,00098,000$

Fixed expenses:

Advertising, traceable $69,3008,30040,50020,500$

Depreciation of special equipment $44,40020,9007,70015,800$

Salaries of product$-$line managers $114,60040,50038,60035,500$

Allocated common fixed expenses$*183,40052,80080,20050,400$

Total fixed expenses $411,700122,500167,000122,200$

Net operating income $($loss$)$ $ $41,300$ $ $26,500$ $ $39,000$ $ $(24,200)$

$*$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.