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 Bikes Total Bikes Bikes Sales Variable manufacturing and selling 932,000 $269,000 406,000 $ 257,000 155, 000 469,000 111,000 203,000 expenseS Contribution margin Fixed expenses: 463, 000 158,000 203,000 102,000 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 20,900 15,200 35,100 51, 400 122,600 $49,200 34,200 35,600 $(20,600) 69,700 40,500 7,100 38,600 81,200 413, 800 123,800 167,400 8,300 43,000 20,700 114,700 41,000 53,800 186,400 Total fixed expenses Net operating income (loss) 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 Should the production and sale of racing bikes be discontinued? Yes 0