Exercise 13-2 (Algo) Dropping or Retaining a Segment [LO13-2] The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: 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) *Allocated on the basis of sales dollars. Total $ 933,000 478,000 455,000 Dirt Bikes $ 266,000 119,000 147,000 Mountain Bikes $ 410,000 208,000 202,000 Racing Bikes $ 257,000 151,000 106,000 69,100 8,200 40,200 20,700 43,300 20,200 7,600 15,500 114,900 40,700 38,700 35,500 186,600 53,200 82,000 51,400 413,900 122,300 168,500 123,100 $ 41,100 $ 24,700 $ 33,500 $ (17,100) 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.