Saved Homework Exercise 11-2 Dropping or Retaining a Segment (LO11-2] 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 $930,000 $263,000 $ 109,000 $ 258,000 467,000 115,000 199, cee 153,000 463,000 143,000 210, see 105,000 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 Het operating Income (loss) 69,400 8,989 40,100 20,400 43,200 20,400 7.600 15,200 114,600 40,500 38,100 36,000 186,000 52,600 81.800 51,600 413, 200 122 400 167,600 123,200 $ 49,300 $ 25,600 $ 42, 480 $(18,200) "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-rup profitability of the various product lines.