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 $ $917,000$ $ $263,000$ $ $404,000$ $ $250,000$

Variable manufacturing and selling expenses $482,000119,000204,000159,000$

Contribution margin $435,000144,000200,00091,000$

Fixed expenses:

Advertising, traceable $70,2008,80040,60020,800$

Depreciation of special equipment $43,30020,2007,70015,400$

Salaries of product$-$line managers $115,10041,00038,10036,000$

Allocated common fixed expenses$*183,40052,60080,80050,000$

Total fixed expenses $412,000122,600167,200122,200$

Net operating income $($loss$)$ $ $23,000$ $ $21,400$ $ $32,800$ $ $(31,200)$

$*$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.