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 Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Total $ 918,000 Net operating income (loss) "Allocated on the basis of sales dollars. 464,000 454,000 Dirt Bikes $264,000 115,000 Mountain Bikes 149,000 $ 401,000 199,000 202,000 Racing Bikes $ 253,000 150,000 103,000 70,000 8,700 40,500 20,800 43,200 20,300 7,400 15,500 115,000 40,600 38,500 35,900 183,600 52,800 80,200 50,600 411,800 122,400 166,600 122,800 $ 42,200 $ 26,600 $ 35,400 $ (19,800) 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. 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? Complete this question by entering your answers in the tabs below. ces Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? Yes No < Required 1 Require 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. Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) Totals Dirt Bikes Mountain Bikes Racing Bikes