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 $ $921,000$ $ $265,000$ $ $405,000$ $ $251,000$

Variable manufacturing and selling expenses $471,000114,000205,000152,000$

Contribution margin $450,000151,000200,00099,000$

Fixed expenses:

Advertising, traceable $70,1008,70040,50020,900$

Depreciation of special equipment $44,10020,7007,60015,800$

Salaries of product$-$line managers $114,10040,10038,80035,200$

Allocated common fixed expenses$*184,20053,00081,00050,200$

Total fixed expenses $412,500122,500167,900122,100$

Net operating income $($loss$)$ $ $37,500$ $ $28,500$ $ $32,100$ $ $(23,100)$

$*$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.