Sales 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. Racing Bikes $ 259,000 158,000) 101,000 Total Dirt Bikes $ 931,000 476,000 455,000 $ 264,000 119,000 145,000 Mountain Bikes $ 408,000 199,000 209,000 69,200 8,600 40,500 20,100 44,100 21,000 7,400 15,700 115,000 40,300 38,000 35,800 186,200 52,800 81,600 51,800 414,500 122,700 168,400 $ 40,500 $ 22,300 $ 40,000 123,400 $ (22,400) 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. 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. Check my work