he 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 $ $926,000$ $ $262,000$ $ $407,000$ $ $257,000$

Variable manufacturing and selling expenses $468,000120,000193,000155,000$

Contribution margin $458,000142,000214,000102,000$

Fixed expenses:

Advertising, traceable $70,5009,00040,60020,900$

Depreciation of special equipment $43,30020,4007,10015,800$

Salaries of product$-$line managers $115,00040,50038,80035,700$

Allocated common fixed expenses$*185,20052,40081,40051,400$

Total fixed expenses $414,000122,300167,900123,800$

Net operating income $($loss$)$ $ $44,000$ $ $19,700$ $ $46,100$ $ $(21,800)$

$*$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.