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 $ 924,000 465,000 Dirt Bikes 459,000 $ 267,000 111,000 156,000 Mountain Bikes $ 403,000 195,000 208,000 Racing Bikes $ 254,000 159,000 95,000 70,100 8,600 40,800 20,700 42,700 20,300 7,300 15,100 115,500 40,200 38,800 36,500 184,800 53,400 80,600 50,800 413,100 122,500 167,500 123,100 $ 45,900 $ 33,500 $ 40,500 $ (28,100) 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? Financial advantage (disadvantage) per quarter