with steps and explanation please

EXERCISE 7-2 Dropping or Retaining a Segme LO 7-2] 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 Mountairn Bikes Racing Bikes Total Sales $300,000 $90,000 $150,000 $60,000 Variable manufacturing and selling expenses Contribution margin Fixed expenses: 120,000 180,000 27,000 63,000 60,000 90,000 33,000 27,000 14,000 9,000 13,000 Advertising, traceable Depreciation of special Salaries of product-line Allocated common fixed 30,000 23,000 35,000 10,000 6,000 12,000 6,000 8,000 10,000 equipment managers expenses Total fixed expenses 60,000 148,000 $ 32,000 18,000 46,000 $17,000 30,000 66,000 $ 24,000 12,000 36,000 $(9,000) 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. Should production and sale of the racing bikes be discontinued? Explain. Show computations to support your answer Recast the above data in a format that would be more usable to management in assessing the long-run profitability of the various product lines. 2