2 10 points 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: Sales eBook Hint Print References 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. Total Dirt Bikes $ 929,000 468,000 461,000 $ 270,000 117,000 153,000 Mountain Bikes $ 402,000 199,000 203,000 Racing Bikes $ 257,000 152,000 105,000 69,400 8,400 40,500 20,500 44,200 20,600 7,700 15,900 113,700 40,400 38,000 35,300 185,800 54,000 80,400 51,400 413,100 123,400 166,600 123,100 $ 47,900 $ 29,600 $ 36,400 $ (18,100) 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