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 $ $926,000$ $ $265,000$ $ $404,000$ $ $257,000$

Variable manufacturing and selling expenses $458,000114,000194,000150,000$

Contribution margin $468,000151,000210,000107,000$

Fixed expenses:

Advertising, traceable $69,7008,30040,60020,800$

Depreciation of special equipment $44,00020,8007,90015,300$

Salaries of product$-$line managers $115,20040,90038,20036,100$

Allocated common fixed expenses$*185,20053,00080,80051,400$

Total fixed expenses $414,100123,000167,500123,600$

Net operating income $($loss$)$ $ $53,900$ $ $28,000$ $ $42,500$ $ $(16,600)$

$*$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.