Exercise 11-2 Dropping or Retaining a Segment [LO11-2] The Regal Cycle Company manufactures three types of blcycles-a dirt bike, a mountaln blke, and a racing blke. Data on sales and expenses for the past quarter follow: Racing Bikes $ 918,000 $266,000 $402,000 S 250,000 Hountain Bikes Dirt Bikes Total Sales Variable manufacturing and sel1ing expenses Contribution margin Fixed expenses Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses 195,000 158,000 465,000 112,000 Book 207,000 92,000 453,000 154,000 8.100 20,600 40.900 53,200 122,800 20,800 15, 600 35,200 50,000 69,400 44,100 114,700 183,600 411,800 40,500 7,900 Hint 38,600 80, 400 167,400 121,600 Total fixed expenses $ 41,200 $ 31,200 $ 39,600 $ (29,600) Net operating income (loss) Print Allocated on the basis of sales dollars. ferences 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 bilkes 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 blkes be discontinued? 3. Prepare a properly formatted segmented income statement thot would be more useful to management in assessing the long-run profitability of the varlous 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 blkes? Required 2