Exercise 6-2 (Algo) Dropping or Retaining a Segment (LO6-2] 8.33 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: Skipped Dirt Mountain Racing Total Bikes Bikes Bikes $ 933,000 $268,000 $409,000 $ 256,800 480,000 119,000 201,000 160,000 453,000 149,000 208,000 96,000 eBook 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) Hint 69,500 8,480 40,400 20,700 43,800 20,900 7,200 15,700 114,600 40,000 38,900 35,700 186,600 53,600 81,800 51,200 414,500 122,900 168,300 123,300 $ 38,500 $ 26,100 $ 39,700 $(27,300) References "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