2 5 oints Skipped eBook Hint a Ask Print References Exercise 11-2 (Algo) 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: Sales Variable manufacturing and selling expenses Contribution margin Total $ 923,000 471,000 452,000 Dirt Bikes $ 268,000 118,000 150,000 70,000 42,600 113,300 184,600 410,500 $ 41,500 9,000 20,300 40, 100 Mountain Bikes 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. 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. 53,600 123,000 $ 27,000 $ 403,000 199,000 204,000 Racing Bikes $ 252,000 154,000 98,000 40,500 7,100 20,500 15, 200 35, 100 38,100 80,600 166,300 50,400 121,200 $ 37,700 $ (23,200) 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.

Exercise 11-2 (Algo) Dropping or Retaining a Segment [LO11-2] The Regat Cycle Company manufoctures three types of bicycles a dit bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter foliow: "Allocated on the basis of sales dollars: Management is concerned about the continued losses shown by tho eacing bikes and wants a recommendation as to whether or not the tine should be discontinued: The special equipment used to produce facing blkes has no resale value and does not wear out. Required: 1. What is the financial advantege (disodvantage) per quarter of discontinuing the Racing Bikes? 2. Should the production and sale of racing bikes be discontinued? 3. Prepare a properfy formatted segmented income statement that would be more usefil to management in assessing the fong-run profitablity of the various product ines