Exercise 13-2 (Algo) Dropping or Retaining a Segment [LO13-2] 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: 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) "Allocated on the basis of sales dollars. Total $ 927,000 Dirt Bikes $270,000 Mountain Bikes $ 402,000 Racing Bikes $ 255,000 473,000 454,000 117,000 153,000 203,000 199,000 153,000 102,000 68,600 8,200 40,100 20,300 43,400. 20,400 7,400 15,600 114,900 40,500 38,500 35,900 185,400 54,000 80,400 51,000 412,300 123,100 166,400 122,800 $ 41,700 $ 29,900 $ 32,600 $ (20,800) 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