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 $ 923,000 477,000 Dirt Bikes $ 266,000 116,000 Mountain Bikes $ 407,000 Racing Bikes $ 250,000 446,000 150,000 209,000 198,000 152,000 98,000 68,400 8,100 40,100 20,200 43,200 20,100 7,600 15,500 113,900 40,200 38,100 35,600 184,600 53,200 81,400 50,000 410,100 121,600 167,200 121,300 $ 35,900 $ 28,400 $ 30,800 $ (23,300) 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 7 Danured R