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 $ $927,000$ $ $268,000$ $ $407,000$ $ $252,000$

Variable manufacturing and selling expenses $477,000120,000205,000152,000$

Contribution margin $450,000148,000202,000100,000$

Fixed expenses:

Advertising, traceable $69,4008,50040,30020,600$

Depreciation of special equipment $43,50020,7007,10015,700$

Salaries of product$-$line managers $115,00040,10038,60036,300$

Allocated common fixed expenses$*$Footnote asterisk $185,40053,60081,40050,400$

Total fixed expenses $413,300122,900167,400123,000$

Net operating income $($loss$)$ $ $36,700$ $ $25,100$ $ $34,600$ $ $(23,000)$

$*$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.