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 $ $932,000$ $ $263,000$ $ $410,000$ $ $259,000$

Variable manufacturing and selling expenses $474,000115,000204,000155,000$

Contribution margin $458,000148,000206,000104,000$

Fixed expenses:

Advertising, traceable $69,9008,40040,60020,900$

Depreciation of special equipment $44,20020,7007,90015,600$

Salaries of product$-$line managers $115,70040,80039,00035,900$

Allocated common fixed expenses$*186,40052,60082,00051,800$

Total fixed expenses $416,200122,500169,500124,200$

Net operating income $($loss$)$ $ $41,800$ $ $25,500$ $ $36,500$ $ $(20,200)$

$*$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.