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 Mountain Racing

Sales $925,000$267,000$407,000$251,000

Variable manufacturing and selling expenses 468,000116,000 200,000152,000

Contribution margin 457,000151,000 207,00099,000

Fixed expenses:

Advertising, traceable 69,300 8,700 40,300 20,300

Depreciation of special equipment 44,000 20,800 8,000 15,200

Salaries of product-line managers 14,100 40,100 38,600 35,400

Allocated common fixed expenses* 185,00053,400 81,400 50,200

Total fixed expenses 412,400123,000 168,300121,100

Net operating income (loss) $44,600$28,000$38,700 $(22,100)

*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.

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 Mountain Racing

Sales $925,000$267,000$407,000$251,000

Variable manufacturing and selling expenses 468,000116,000 200,000152,000

Contribution margin 457,000151,000 207,00099,000

Fixed expenses:

Advertising, traceable 69,300 8,700 40,300 20,300

Depreciation of special equipment 44,000 20,800 8,000 15,200

Salaries of product-line managers 114,100 40,100 38,600 35,400

Allocated common fixed expenses* 185,00053,400 81,400 50,200

Total fixed expenses 412,400123,000 168,300121,100

Net operating income (loss) $44,600$28,000$38,700 $(22,100)

*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.

Totals Dirt Mountain Racing

Sales $925,000 $267,000 $407,000 $251,000

Variable manufacturing and selling expenses 468,000 116,000 200,000 152,000

Contribution margin (loss) 457,000 151,000 207,000 99,000

Traceable fixed expenses:

Advertising 69,300 8,700 40,300 20,300

Depreciation of special equipment 44,000 20,800 8,000 15,200

Salaries of the product line managers 114,100 40,100 38,600 35,400

Total traceable fixed expenses 227,400 69,600 86,900 70,900

Product line segment margin (loss) 229,600 $81,400 $120,100 $28,100

Common fixed expenses 185,000

Net operating income (loss) $44,600

Required:

1. What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes?