value 16.67 points Exercise 10-2 Dropping or Retaining a Segment [LO10-2] 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 Bikes $ 925,000$ 261,000 $ 407,000 $257,000 Variable manufacturing and selling expenses 464,000 114,000 193,000 157,000 TotalBikesBikes Sales Contribution margin 461,000 147,000214,000 100,000 Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses 8,800 40,300 20,100 15,200 114,90040,100 38,200 36,600 185,000 52,200 81,400 51,400 69.200 43,20020,600 7,400 Total fixed expenses 412,300 121.700 167,300 123.300 Net operating income (loss) S 48,700 S 25,300 46,700 $ (23,300) 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