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 $ $928,000$ $ $268,000$ $ $403,000$ $ $257,000$

Variable manufacturing and selling expenses $464,000116,000191,000157,000$

Contribution margin $464,000152,000212,000100,000$

Fixed expenses:

Advertising, traceable $69,8008,70040,30020,800$

Depreciation of special equipment $44,50020,7007,80016,000$

Salaries of product$-$line managers $114,70040,50039,00035,200$

Allocated common fixed expenses$*$Footnote asterisk $185,60053,60080,60051,400$

Total fixed expenses $414,600123,500167,700123,400$

Net operating income $($loss$)$ $ $49,400$ $ $28,500$ $ $44,300$ $ $(23,400)$

$*$Footnote asteriskAllocated 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.