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:

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. Common costs are allocated and will continue regardless of whether or not the racing bikes are discontinued.

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?

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