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: Mountain Racing Dirt Bikes Total Bikes Bikes $ 936,000 $270,000 $407,000 $259,000 467,000 116,000 198,000 153,000 Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: 469,000 154,000 209,000 106,000 40,300 7,200 8,300 20,100 15,700 115,400 40,900 38,500 36,000 187,200 54,000 81,400 51,800 68,700 43,900 21,000 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses 415,200 124,200 167,400 123,600 Net operating income (loss) $53,800 29,800 41,600 (17,600) 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