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 $ $921,000$ $ $261,000$ $ $410,000$ $ $250,000$

Variable manufacturing and selling expenses $480,000116,000204,000160,000$

Contribution margin $441,000145,000206,00090,000$

Fixed expenses:

Advertising, traceable $68,9008,10040,60020,200$

Depreciation of special equipment $43,90020,5007,70015,700$

Salaries of product$-$line managers $115,90040,80038,30036,800$

Allocated common fixed expenses$*184,20052,20082,00050,000$

Total fixed expenses $412,900121,600168,600122,700$

Net operating income $($loss$)$ $ $28,100$ $ $23,400$ $ $37,400$ $ $(32,700)$

$*$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.