Exerclse $11\mathrm{.}2($Algo$)$ Droppling or Retalning a Segment $[$LO$11-2]$

The Regal Cycle Company manufactures three types of bicycles$-$a dirt bike, a mountain bike, and a racling bike. Data on sales and

expenses for the past quarter follow:

$*$Allocated on the basis of sales dollars.

Management is concerned about the contlinued losses shown by the racing bikes and wants a recommendation as to whether or not

the line should be discontinued. The speclal equipment used to produce racing bikes has no resale value and does not wear out.

Required:

What is the financlal advantage $($disadvantage$)$ per quarter of discontinulng the Racing Bikes?

Should the production and sale of racing bikes be discontinued?

Prepare a properly formatted segmented Income statement that would be more useful to management in assessing the long$-$run

profitability of the varlous product lines.