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 $ 922,000 431,00 443.000 Dirt Bikes $ 266,000 120,000 146,000 Mountain Bikes $ 400.000 205,000 198.00 Racing Bikes $ 253,000 156,000 97,000 Sales 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 Incone (loss) 70,500 43,400 113,700 184,400 412,000 $ 29,000 8,700 20,100 40,300 53,200 122, 300 $ 23,700 415,000 7,500 38,200 30.600 167,200 $ 30,800 20,898 15,00 35, 30e 50,600 122,500 $ (25,500) "Allocated 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 resate 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