Exercise 6-2 (Algo) Dropping or Retaining a Segment (LO6-2] 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: Dirt Bikes $264, 000 Mountain Bikes $ 408,000 Racing Bikes $ 256, 000 148,000 212,000 102,000 Total Sales $ 928,000 Variable manufacturing and selling expenses_466,000 Contribution margin 462,000 Fixed expenses: Advertising, traceable 70, 100 Depreciation of special equipment 44, 300 Salaries of product-line managers 114, 200 Allocated common fixed expenses* 185, 600 Total fixed expenses 414, 200 Net operating income (loss) $ 47,800 8,800 21,000 40, 300 52, 800 122, 900 $ 25,100 40, 800 7,900 38, 100 81, 600 168, 400 43,600 20, 500 15, 400 35, 800 51,200 122, 900 $ (20,900) $ *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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Required 1 Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? Ores ONO Complete this question by entering your answers in the tabs below. Required i Required 2 Required 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. Totals Dirt Bikes Mountain Bikes Racing Bikes 000 Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) 0 0 0 0 0 $ $ $ Net operating income (loss) $ 0