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. Net operating income (loss) es "Allocated on the basis of sales dollars. M Total $ 932,000 Dirt Bikes $ 268,000 $ 466,000 119,000 466,000 149,000 69,900 8,800 43,400 20,200 114,700 40,400 186,400 53,600 414,400 123,000 $ 51,600 $ 26,000 $ 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 11 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Biki ng or Retaining a Segment [LO11-2] ctures three types of bicycles-a dirt bike, a >ata on sales and expenses for the past quarter Total $ 932,000 Dirt Bikes $ 268,000 Mountain Bikes $ 405,000 Racing Bikes $ 259,000 lling expenses 466,000 119,000 194,000 153,000 466,000 149,000 211,000 106,000 69,900 8,800 40,400 20,700 ipment nagers nses* 43,400 20,200 7,500 15,700 114,700 40,400 38,700 35,600 186,400 53,600 81,000 51,800 414,400 123,000 167,600 123,800 $ 51,600 $ 26,000 $ 43,400 $ (17,800) lars. ne continued losses shown by the racing bikes and ether or not the line should be discontinued. The e racing bikes has no resale value and does not disadvantage) per quarter of discontinuing the of racing bikes be discontinued? gmented income statement that would be more the long-run profitability of the various product ering your answers in the tabs below. red 3 sadvantage) per quarter of discontinuing the Racing Bikes? Required 1 Required 2 Required 3 Prepare a properly formatted segmented income statement that would be more useful 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 M < Required 2 Required 3 es ed income statement that would be more useful to management in assessing the long-r Totals Dirt Bikes Mountain Bikes Racing Bikes < Required 2 Required 3 >