Exercise 11-2 (Algo) Dropping or Retaining a Segment (L011-2] The Regal Cycle Company manutactures three types of bicycles-a din bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Total 919,000 462,000 457,080 Dirt bikes $ 260,000 118,000 146.000 Mountain Bikes $ 401,000 192.000 209.00 Racing likes 5.254.000 152,000 102,000 Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses Advertising, traceable Depreciation of special equipment Salaries of product line managers Allocated Corno fixed expenses Total Fixed expenses Net operating income (los) 69,200 43,360 115,000 183,800 411, $ 45,700 8,300 20,20 40.000 52,800 121,100 $ 24,700 40,200 7.600 1,100 30,200 166.100 $ 42,900 20,700 25,500 6.900 50,00 129,900 $ 21,900) "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 run profitability of the various product lines. hela 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 profitability of the various product lines. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes Required Required 2 > 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. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued Oros NO 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, Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 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. Totals Dirt Bikes Mountain Bikes Racing Bikes 0 0 0 0 Contribution margindoss) Traceable fixed expenses 0 + 0 Total traceable food expenses Product line segment margin (loss) 0 05 0 $ 0$ $ 0 Net operating income (loss)
