Exercise 11-2 Dropping or Retalning a Segment [LO11-21 The Regal Cycle Company manufactures three types of bicycles-a dirt blke, a mountaln bike, and a racing bike. Data on sales and expenses for the past quarter follow Dirt Mountain Racing Total ,000 128,889 27,888 18e,609 63,809 BikesBikes $ Bikes Sales Variable nanufacturing and selling expenses Contribution nargin Fixed expenses: $ $ 9e,000 15e,000 6e,008 99.809 6e.eee 33,869 27,809 Advertising, traceable Depreciation of special equipment Salaries of product-1ine managers Allocated common fixed expenses 6,888 8,008 18,808 12,809 36,009 S 32,88 17,88 24,80 (9,603) 23,889 6,088 35,889 12,88e 68,009 18,008 148,609 46,809 14,008 9,809 13,808 ,000 66,869 Total fixed expenses Net operating incone (loss) Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing blkes and wants a recommendation as to whether or not the llne should be discontinued. The speclal equipment used to produce racing bikes has no resale value and does not wear out Required: 1. What Is the financlal advantage (dlsadvantage) per quarter of discontinulng 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 profitabillity of the varlous product lines