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 $ $920,000$ $ $265,000$ $ $404,000$ $ $251,000$

Variable manufacturing and selling expenses $478,000116,000204,000158,000$

Contribution margin $442,000149,000200,00093,000$

Fixed expenses:

Advertising, traceable $68,7008,20040,20020,300$

Depreciation of special equipment $43,70020,6007,50015,600$

Salaries of product$-$line managers $115,80040,80038,80036,200$

Allocated common fixed expenses$*$Footnote asterisk $184,00053,00080,80050,200$

Total fixed expenses $412,200122,600167,300122,300$

Net operating income $($loss$)$ $ $29,800$ $ $26,400$ $ $32,700$ $ $(29,300)$

$*$Footnote asteriskAllocated 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:

What is the financial advantage $($disadvantage$)$ per quarter of discontinuing the Racing Bikes?

Should the production and sale of racing bikes be discontinued?

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.