Exercise 12-2 Dropping or Retaining a Segment (LO12-2] 60 points 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: eBook Dirt Mountain Racing Total Bikes Bikes Bikes $ 930,000 $269,000 $ 402,000 $ 259,000 470,000 112,000 200,000 158,000 460,000 157,000 202,000 101,000 Hint Print References 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) 69,2008,900 40,200 20,100 43,900 20,700 7,800 15,400 115,900 40,400 38,700 36.800 186,000 53,800 80,400 5 1,800 415,000 123,800 167, 100124,100 $ 45,000 $ 33,200 $ 34,900 $(23, 100) *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