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 $476,000117,000203,000156,000$

Contribution margin $452,000151,000200,000101,000$

Fixed expenses:

Advertising, traceable $70,0009,00040,70020,300$

Depreciation of special equipment $43,60020,5007,40015,700$

Salaries of product$-$line managers $114,80040,50038,60035,700$

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

Total fixed expenses $414,000123,600167,300123,100$

Net operating income $($loss$)$ $ $38,000$ $ $27,400$ $ $32,700$ $ $(22,100)$

$*$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.