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 $ 262,000 $ 408,000 $ 254,000

Variable manufacturing and selling expenses 476,000 114,000 204,000 158,000

Contribution margin 448,000 148,000 204,000 96,000

Fixed expenses: Advertising, traceable 70,800 8,900 40,900 21,000

Depreciation of special equipment 43,900 20,800 7,600 15,500

Salaries of product-line managers 114,900 40,300 38,500 36,100

Allocated common fixed expenses* 184,800 52,400 81,600 50,800

Total fixed expenses 414,400 122,400 168,600 123,400

Net operating income (loss) $ 33,600 $ 25,600 $ 35,400 $ (27,400) *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. Prepare a properly formatted segmented