Check my work Exercise 11-2 (Algo) Dropping or Retaining a Segment [LO11-2] 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 Sales $925,000 $ 263,000 Variable manufacturing and selling expenses Contribution margin Mountain Bikes $409,000 Racing Bikes $ 253,000 471,000 117,000 203,000 454,000 146,000 206,000 Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses. Total fixed expenses 70,500 8,500. 41,000 44,200 20,200 8,000 115,200 40,200 38,800 185,000 52,600 81,800 414,900 121,500 169,600 Net operating income (loss) "Allocated on the basis of sales dollars. $ 39,100 $ 24,500 $ 36,400 151,000 102,000 21,000 16,000 36,200 50,600 123,800 $ (21,800) 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.