Exercise 12-2 Dropping or Retaining a Segment [L012-2] 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 Bikes Total Bikes Bikes S 925,000 $264,000 $ 401,000 260,000 Variable manufacturing and selling expenses 462,000 114,000 196,00 152,000 108,000 Sales 205,000 - Contribution margin Fixed expenses: 463,000 150,000 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 8,500 42,900 20,300 115,200 40,600 185,000 52,800 20,700 15,400 35,700 52,000 122.290 166,700 123,6op 69,600 40,400 7,200 38,900 80,200 Total fixed expenses Net operating income (loss) $ 50, 300 $ 27,800 $ 38,300 $(15,800) 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 Required 1Required 2Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Required2> Required 1Required 2Required 3 Should the production and sale of racing bikes be discontinued? OYes ONo Required 1 Required 3 > Required 1 Required 2Required 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. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) Required 2 Required 3