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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 Regal Cycle Company manufactures three types of bicyclesa 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 $ 925,000 $ 266,000 $ 403,000 $ 256,000
Variable manufacturing and selling expenses 472,000114,000199,000159,000
Contribution margin 453,000152,000204,00097,000
Fixed expenses:
Advertising, traceable 69,2008,50040,30020,400
Depreciation of special equipment 44,20021,0007,80015,400
Salaries of product-line managers 115,80040,50038,80036,500
Allocated common fixed expenses*Footnote asterisk 185,00053,20080,60051,200
Total fixed expenses 414,200123,200167,500123,500
Net operating income (loss) $ 38,800 $ 28,800 $ 36,500 $ (26,500)
*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.

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