Exercise 12-2 Dropping or Retaining a Segment IL012-2] 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: Racing Dirt Mountain Total Bikes Bikes Bikes Sales 930,000 270,000 402,000 258,000 Variable manufacturing and selling expenses 466,000 119,000 192,000 155,000 Contribution margin 464,000 151,000 210,000 103,000 Fixed expenses: 69,800 20,700 Advertising, traceable 8,700 40,400 Depreciation of special equipment 43,800 20,700 7,200 15,900 113,100 40,000 38,000 Salaries of product line managers 35,100 54,000 51,600 186,000 80,400 Allocated common fixed expenses" 412,700 123,400 166,000 123,300 Total fixed expenses 51,300 27,600 44,000 (20,300) Net operating income (loss) *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