Exercise $13-2($Algo$)$ Dropping or Retaining a Segment $[$LO$13-2]$

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 considering discontinuing the racing bikes. The special equipment used to produce racing bikes has no resale value

and does not wear out.

Required:

What is the financial advantage $($disadvantage$)$ per quarter of discontinuing the Racing Bikes?

Should the production and sale of racing bikes be discontinued?

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What is the financial advantage $($disadvantage$)$ per quarter of discontinuing the Racing Bikes?