Exercise 11-2 (Algo) Dropping or Retaining a Segment (LO11-2] 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: Total $ 920,000 465,000 455,000 Dirt Bikes $ 265,000 110,000 155,000 Mountain Bikes $ 403,000 202,000 201,000 Racing Bikes $ 252,000 153,000 99,000 Sales 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) 69, 700 43,500 115,200 184,000 412,400 $ 42,600 8,800 20,600 40,100 53,000 122,500 $ 32,500 40,500 7,700 38,700 80,600 167,500 $ 33,500 20,400 15, 200 36,400 50,400 122,400 $ (23,400) *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