connect Exercise 7-2 Dropping or Retaining a Segment LO7-2] 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: 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: 1a. What is the impact on net operating income by discontinuing racing bikes? (Decreases should be indicated by a minus sign.) 1b. Should production and sale of the racing bikes be discontinued? 2a. Prepare a segmented income statement. 2b. Would a segmented income statement format be more usable to management in assessing the long-run profitability of the various product lines. connect Exercise 7-2 Dropping or Retaining a Segment LO7-2] 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: 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: 1a. What is the impact on net operating income by discontinuing racing bikes? (Decreases should be indicated by a minus sign.) 1b. Should production and sale of the racing bikes be discontinued? 2a. Prepare a segmented income statement. 2b. Would a segmented income statement format be more usable to management in assessing the long-run profitability of the various product lines