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. Mountain Total $ 926,000 473,000 Dirt Bikes 453,000 $ 270,000 112,000 158,000 Bikes. $ 403,000 208,000 195,000 Racing Bikes $ 253,000. 153,000 100,000 69,600 8,700 40,400 20,500 44,000 20,700 7,600 15,700. 114,700 40,500 39,000 35,200 185,200 54,000 80,600 50,600 413,500 123,900 167,600 122,000 $ 39,500 $ 34,100 $ 27,400 $ (22,000) 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 31 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Required 1 Required 2 >