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 $ $922,000$ $ $262,000$ $ $406,000$ $ $254,000$

Variable manufacturing and selling expenses $466,000116,000197,000153,000$

Contribution margin $456,000146,000209,000101,000$

Fixed expenses:

Advertising, traceable $68,9008,20040,50020,200$

Depreciation of special equipment $43,80020,3008,00015,500$

Salaries of product$-$line managers $114,90040,40038,50036,000$

Allocated common fixed expenses$*184,40052,40081,20050,800$

Total fixed expenses $412,000121,300168,200122,500$

Net operating income $($loss$)$ $ $44,000$ $ $24,700$ $ $40,800$ $ $(21,500)$

$*$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.