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 $ $925,000$ $ $266,000$ $ $403,000$ $ $256,000$

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.