Exercise 12-2 Dropping or Retaining a Segment [LO12-2] 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 Bikes $ 921,000 $264,200 $ 400,000 $ 257,000 477, see 120,00 202,eee 155, eee 444, eee 144,00 198, eee 102, eee 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 (loss) 69,900 9,000 42,900 20, 200 115,100 40, 2ee 184, 2ee 52,800 412,100 122,200 31,900 $ 21,800 $ 40,300 20,600 7,600 15,100 38,800 36, 10e 80,000 51,400 166,700 123,200 31,300 $(21,200) $ *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 1 Required 2 Required 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)