Differential Analysis: The Key to Decision Making EXERCISE 12-2 Dropping or Retaining a Segment L012-2 Regal Cycle Company manufactures three t ing bike. Da ta on sales and expenses for the past quarter follow bicycles-a dirt bike, a mountain bike, and a rac Dirt Bikes Mountain Racing Bikes Total Bikes $300,000 $90,000 $150,000 $60,000 Variable manufacturing and selling expenses Contribution margin Fixed expenses: 120,000 27.000 60,000 33,000 180,000 63000 90,000 27,000 Advertising, traceable. Depreciation of special equipment Salaries of product-line managers. 30,000 10,000 14,000 6,000 23,000 6,000 9,000 8,000 35,000 12,000 13,000 10,000 fixed expenses60,000 18,000 30,000 12.000 148,000 46000 66,000 36.000 9,000) on the basis of sales dollars. endation as to whether or not the line should be discontinued. The special equipment used to uce racing bikes has no resale value and does not wear out. Management is concerned aboutt he continued losses shown by the racing bikes and wants a rec- What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Required: the production and sale of racing bikes be discontinued? a properly formatted segmented income statement that would be more useful to man- gement in assessing the long-run profitability of the various product lines. Differential Analysis: The Key to Decision Making EXERCISE 12-2 Dropping or Retaining a Segment L012-2 Regal Cycle Company manufactures three t ing bike. Da ta on sales and expenses for the past quarter follow bicycles-a dirt bike, a mountain bike, and a rac Dirt Bikes Mountain Racing Bikes Total Bikes $300,000 $90,000 $150,000 $60,000 Variable manufacturing and selling expenses Contribution margin Fixed expenses: 120,000 27.000 60,000 33,000 180,000 63000 90,000 27,000 Advertising, traceable. Depreciation of special equipment Salaries of product-line managers. 30,000 10,000 14,000 6,000 23,000 6,000 9,000 8,000 35,000 12,000 13,000 10,000 fixed expenses60,000 18,000 30,000 12.000 148,000 46000 66,000 36.000 9,000) on the basis of sales dollars. endation as to whether or not the line should be discontinued. The special equipment used to uce racing bikes has no resale value and does not wear out. Management is concerned aboutt he continued losses shown by the racing bikes and wants a rec- What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Required: the production and sale of racing bikes be discontinued? a properly formatted segmented income statement that would be more useful to man- gement in assessing the long-run profitability of the various product lines