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 $ $915,000$ $ $261,000$ $ $402,000$ $ $252,000$

Variable manufacturing and selling expenses $478,000118,000207,000153,000$

Contribution margin $437,000143,000195,00099,000$

Fixed expenses:

Advertising, traceable $69,5008,60040,40020,500$

Depreciation of special equipment $43,10020,1007,20015,800$

Salaries of product$-$line managers $114,20040,10038,80035,300$

Allocated common fixed expenses$*183,00052,20080,40050,400$

Total fixed expenses $409,800121,000166,800122,000$

Net operating income $($loss$)$ $ $27,200$ $ $22,000$ $ $28,200$ $ $(23,000)$

$*$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.