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: Dirt Mountain Racing Total Bikes Bikes Bike $ 923,000 $267,000 $405,000 $250,000 465,000 117,000 191,000 157,000 450,000 150.000 215,000 93,000 Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment salaries of product line managers located common fixed expennen Total fixed expenses Net operating income (loss) 70,200 8,900 40.000 20,500 43,000 20,200 7,600 15,200 115.100 40,200 38,600 36,300 184,600 53.400 81,200 50.000 412,900 122,700 168,200 122,000 $ 45, 1005 27,300 $ 46, DO 5129.000) *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 Complete this question by entering your answers in the tabs below