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 $ $922,000$ $ $266,000$ $ $404,000$ $ $252,000$

Variable manufacturing and selling expenses $480,000120,000202,000158,000$

Contribution margin $442,000146,000202,00094,000$

Fixed expenses:

Advertising, traceable $69,5008,60040,60020,300$

Depreciation of special equipment $43,40020,4007,50015,500$

Salaries of product$-$line managers $115,10040,00038,40036,700$

Allocated common fixed expenses$*184,40053,20080,80050,400$

Total fixed expenses $412,400122,200167,300122,900$

Net operating income $($loss$)$ $ $29,600$ $ $23,800$ $ $34,700$ $ $(28,900)$

$*$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.