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 $ $924,000$ $ $263,000$ $ $407,000$ $ $254,000$

Variable manufacturing and selling expenses $481,000113,000210,000158,000$

Contribution margin $443,000150,000197,00096,000$

Fixed expenses:

Advertising, traceable $69,5008,40040,80020,300$

Depreciation of special equipment $43,30020,2007,60015,500$

Salaries of product$-$line managers $115,80040,60038,80036,400$

Allocated common fixed expenses$*184,80052,60081,40050,800$

Total fixed expenses $413,400121,800168,600123,000$

Net operating income $($loss$)$ $ $29,600$ $ $28,200$ $ $28,400$ $ $(27,000)$

$*$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.