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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. Mountain Bikes Sales Total $927,000 473,000 454,000 Dirt Bikes $ 268,000 Racing Bikes $ 251,000 $408,000 205,000 Variable manufacturing and selling expenses Contribution margin Fixed expenses: 111,000 157,000 94,000 157,000 203,000 Advertising, traceable. 70,100 8,700 40,600 20,800 44,200 20,900 7,500 15,800 Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses. Total fixed expenses 115,500 40,100 38,500 36,900 53,600 81,600 50,200 185,400 415,200 123,300 160,200 123,700 Net operating income (loss) $ 38,800 $33,700 $ 34,000 $(29,700) '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 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 Contribution margin (loss) Traceable fixed expenses