Should the production and sale of racing bikes be discontinued?

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 Mountain Racing Dirt Bikes Total Bikes Bikes Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: $. 932,000 $267,000 $. 406,000 ? 259,000 475,000 119,000 457,000 148,000 203,000 203,000 153,000 106,000 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses 70,600 40,800 7,400 38,800 81,200 168,200 20,900 15,600 35,800 51,800 124,100 8,900 43,400 20,400 115,000 40,400 186,400 415,400 123,100 53.400 Total fixed expenses Net operating income (loss) $ 41,600 24,90 $ 34,800 $(18,100) 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