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 $ $918,000$ $ $263,000$ $ $401,000$ $ $254,000$

Variable manufacturing and selling expenses $476,000112,000205,000159,000$

Contribution margin $442,000151,000196,00095,000$

Fixed expenses:

Advertising, traceable $69,4008,50040,40020,500$

Depreciation of special equipment $42,90020,4007,20015,300$

Salaries of product$-$line managers $115,20040,60038,30036,300$

Allocated common fixed expenses$*183,60052,60080,20050,800$

Total fixed expenses $411,100122,100166,100122,900$

Net operating income $($loss$)$ $ $30,900$ $ $28,900$ $ $29,900$ $ $(27,900)$

$*$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.