Save & Ex Exercise 13-2 (Algo) Dropping or Retaining a Segment [LO13-2] 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: Contribution margin Fixed expenses: Total Sales $ 934,000 Variable manufacturing and selling expenses 476,000 458,000 70,000 43,700 Dirt Bikes $ 269,000 114,000 155,000 Mountain Bikes $ 405,000 208,000 197,000 Racing Bikes $ 260,000 154,000 106,000 8,600 40, 600 20,800 20,200 7,900 116,000 186, 800 416, 500 $ 41,500 40,500 38,600 15, 600 36,900 53,800 81,000 52,000 123,100 168,100 125, 300 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. $ 31,900 $ 28,900 $ (19,300) 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