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) "Allocated on the basis of sales dollars. Total $ 916,000 Dirt Bikes $264,000 Mountain Bikes 461,000 455,000 111,000 153,000 $ 401,000 197,000 204,000 Racing Bikes $ 251,000 153,000 98,000 69,000 8,400 40, 400 20,200 43,500 21,000 7,200 15,300 114,700 183, 200 410,400 40, 400 52,800 122,600 38,500 80,200 166,300 35,800 50,200 121,500 $ 44,600 $ 30,400 $ 37,700 $ (23,500) 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? Required 2 > Prev 2 of 6 Next > Print Net operating income (loss) "Allocated on the basis of sales dollars. $ 44,600 $ 30,400 ferences Management is concerned about the continued losses shown by the racing bikes and w the line should be discontinued. The special equipment used to produce racing bikes ha Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing E 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 profitability of the various product lines. Complete this question by entering your answers in the tabs below. Mc Graw H Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? OYes ONO Required 1 Required 3 > < Pre C anagement is concerned about the continued losses shown by the racing bikes and wants a recommendation as to whether or not line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear out. equired: What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Should the production and sale of racing bikes be discontinued? Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run rofitability 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. 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