2 Exercise 13-2 (Algo) 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 kipped Sales eBook Hint Print Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating income (loss) "Allocated on the basis of sales dollars. Total $930,000 Dirt Bikes 482,000 448,000 $ 268,000 119,000 149,000 Mountain Bikes $ 407,000 Racing Bikes $255,000 206,000 1520 201,000 98,000 70,200 9,000 40,900 20,300 43,000 20,400 7,500 15,700 115,200 40,800 38,100 36,300 186,000 53,600 $1,000 415,000 123,800 167,900) 123300 $ 33,000 $25,200 $33,100 $ (25,300) ferences 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. Complete this question by entering your answers in the tabs below.