2 25 points Exercise 13-2 (Static) Dropping or Retaining a Segment [LO13-2] 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: Mountain Total Dirt Bikes HOM Sales 300,000 $90,000 $150,000 Racing Bikes $60,000 Pre Variable manufacturing and selling expense Contribution margin 120,000 27,000 40,000 33,000 180,000 63,000 90,000 27,000 Fixed expensess Advertising, traceable 30,000 10,000 14,000 6,000 Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses 23,000 6,000 9,000 8,000 35,000 12,000 13,000 10,000 60,000 10,000 30,000 12,000 Het operating income (loss) "Allocated on the basis of sales dollars. 140,000 $32,000 46,000 46,000 36,000 $17,000 24,000 (9,000) 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 income statement that would be more useful to management in assessing the long-run profitability of the various product lines. Check my work