Exercise 12-2 Dropping or Retaining a Segment (L012-2) 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 $934.000 461, eee 473,eee Dirt Bikes $266.000 113, eee 153, eee Mountain Bikes $ 410,eee 197, eee 213,eee Racing Bikes $ 258, eee 151, eee 107, eee 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) 70,100 44, eee 115,400 186, 8ee 416,3ee 56,700 8,900 20,400 40,100 53,200 122,60 $ 30,400 40,800 7,800 38,5ee 82, eee 169, 100 43,900 20,400 15, 8ee 36,800 51,680 124,600 $(17,600) $ $ "Allocated on the basis of sales dollars. "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