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: Total $ 926,000 474,000 452,000 Dirt Bikes $ 263,000 117,000 146,000 Mountain Bikes $ 407,000 200,000 207,000 Racing Bikes $ 256,000 157,000 99,000 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) 70,800 44,000 115,100 185,200 415, 100 $ 36,900 8,900 20,500 40,300 52,600 122,300 $ 23,700 40,900 8,000 38,700 81,400 169,000 $ 38,000 21,000 15,500 36,100 51,200 123,800 $ (24,800) *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