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 $ $928,000$ $ $263,000$ $ $406,000$ $ $259,000$

Variable manufacturing and selling expenses $472,000118,000201,000153,000$

Contribution margin $456,000145,000205,000106,000$

Fixed expenses:

Advertising, traceable $69,5008,90040,50020,100$

Depreciation of special equipment $43,70020,5008,00015,200$

Salaries of product$-$line managers $116,60041,00038,80036,800$

Allocated common fixed expenses$*185,60052,60081,20051,800$

Total fixed expenses $415,400123,000168,500123,900$

Net operating income $($loss$)$ $ $40,600$ $ $22,000$ $ $36,500$ $ $(17,900)$

$*$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.