Exercise 13-2 (Algo) Dropping or Retaining a Segment [L013-2] The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses forthe past quarter follow: Mountain . . Total Dirt Bikes Bikes Rac1ng Bikes Sales $ 926,000 $ 265,000 $ 406,000 $ 255,000 Variable manufacturing and selling expenses 463,000 115,000 194,000 154,000 Contribution margin 463,000 150,000 212,000 101,000 Fixed expenses: Advertising, traceable 69,600 8,600 40,300 20,700 Depreciation of special equipment 43,500 20,900 7,500 15,100 Salaries of productline managers 114,600 40,100 38,700 35,800 Allocated common fixed expenses* 185,200 53,000 81,200 51,000 Total fixed expenses 412,900 122,600 167,700 122,600 Net operating income (loss) $ 50,100 $ 27,400 $ 44,300 $ (21,600) *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 nancial 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 ofthe 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? ::| 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? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 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. Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss)