Exercise 11-2 Dropping or Retaining a Segment (L011-2) 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: Dirt Mountain Racing Total Bikes Bikes Bikes $ 921,000 $262,000 $ 404,000 $ 255,000 474,000 120,000 200,000 154,000 447,000 142,000 204,000 101,000 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, 100 8,500 40,300 20,300 44,400 20,800 7,800 15,800 113,700 40,300 38,200 35,200 184,200 52,400 80,800 51,000 411,400 122,000 167, 100 122,300 $ 35,600 $ 20,000 $ 36,900 $(21,300) "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 What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes