Exercise $6-2($Algo$)$ Dropping or Retaining a Segment $[$LO$6-2]$

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 $ $927,000$ $ $266,000$ $ $408,000$ $ $253,000$

Variable manufacturing and selling expenses $473,000115,000198,000160,000$

Contribution margin $454,000151,000210,00093,000$

Fixed expenses:

Advertising, traceable $69,8008,80040,20020,800$

Depreciation of special equipment $43,90020,5007,90015,500$

Salaries of product$-$line managers $115,30041,00038,80035,500$

Allocated common fixed expenses$*$Footnote asterisk $185,40053,20081,60050,600$

Total fixed expenses $414,400123,500168,500122,400$

Net operating income $($loss$)$ $ $39,600$ $ $27,500$ $ $41,500$ $ $(29,400)$

$*$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?