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: 11 Sales ces 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 Net operating income (loss) "Allocated on the basis of sales dollars. Total Dirt Bikes $ 927,000 470,000 $ 268,000 112,000 Mountain Bikes $ 406,000 Racing Bikes $ 253,000 202,000 156,000 457,000 156,000 204,000 97,000 69,200 8,300 40,200 20,700 43,100 20,300 7,300 15,500 114,600 40,300 38,300 36,000 185,400 53,600 81,200 50,600 412,300 122,500 167,000 122,800 $ 44,700 $ 33,500 $ 37,000 $ (25,800) 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 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? < Required 1 Required 2 > 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 0 0 0 0 0 0 0 0 0 $ 0 $ 0 $ 0 $ 0 Required a