Exercise 13-2 (Algo) Dropping or Retaining a Segment (L013-2] 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 $ 920,000 $263,000 $403,000 $ 254,000 478,000 115,000 205,000 158,000 442,000 148,000 198,000 96,000 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 Bet operating Income (loss) 69,600 8,500 43,600 20,000 114,900 40,100 184,000 52,600 412,100 122,000 $ 29,900 $ 26,00 41,000 20,100 7,100 15.700 38,800 36,000 80.600 50.800 162,500 122,600 30,500 $426,600) "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