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 $ $923,000$ $ $268,000$ $ $404,000$ $ $251,000$

Variable manufacturing and selling expenses $466,000115,000194,000157,000$

Contribution margin $457,000153,000210,00094,000$

Fixed expenses:

Advertising, traceable $69,6008,60040,90020,100$

Depreciation of special equipment $43,80020,4007,90015,500$

Salaries of product$-$line managers $115,00040,70038,60035,700$

Allocated common fixed expenses$*184,60053,60080,80050,200$

Total fixed expenses $413,000123,300168,200121,500$

Net operating income $($loss$)$ $ $44,000$ $ $29,700$ $ $41,800$ $ $(27,500)$

$*$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.