Exercise 11-2 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: 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 income (los) Dirt Mountain Racing Total Bikes Bikes Bikes $922,000 $261,000 $404,000 $ 257,000 457,000 113,000 191,000 153,000 465,000 148,000 213,000 104,000 69,500 8,500 40,800 20,200 43,600 20,300 7.500 15,800 115,700 40, 700 38,700 36,300 184,400 52,200 80, 800 51,400 413, 200 121,700 167,800 123,700 $ 51,800 $ 26,300 $ 45,200 $(19,700) *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 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 tlan hirentering your answers in the tabs below