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 $ 924,000 / $ 261,000 / $ 406,000 / $ 257,000

Variable manufacturing and selling expenses 461,000 / 111,000 / 195,000 / 155,000

Contribution margin 463,000 / 150,000 / 211,000 / 102,000

fixed expenses:

Advertising, traceable 69,600 / 8,600 / 40,800 / 20,200

Depreciation of special equipment 44,200 / 21,000 / 7,900 / 15,300

Salaries of product-line managers 115,400 / 40,200 / 38,200 / 37,000

Allocated common fixed expenses* 184,800 / 52,200 / 81,200 / 51,400

Total fixed expenses 414,000 / 122,000 / 168,100 / 123,900

Net operating income (loss) $ 49,000 / $ 28,000 / $ 42,900 / $ (21,900)

*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. properly formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines.

question

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