Exercise 11-2 (Algo) Dropping or Retaining a Segment [LO11-2) The Regal Cycle Company manufactures three types of bicycles-o dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Mountain Total Dirt Bikes ka Racing Bikes Sales $.928,000 261,000 408.000 $ 259,000 Variable manufacturing and selling expenses 463,000 116,000 196.000 151.000 Contribution margin 465.000 165.000 212.000 100,000 Fixed expenses Advertising, traceable 69,600 8,600 40,300 20,700 Depreciation of special equipment 43,000 20,700 7.200 15,100 Salaries of product-line managers 114,500 40.800 38,500 35,200 Allocated common fixed expenses 185,600 52.200 81,600 51.000 Total Eixed expenses 412,700 12200 167.600 122,800 Het operating income (ons) 52,300 $ 22,700 44.400 $14.00) "Allocated on the basis of sales dollars. 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 Answer is not complete 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. Answer is not complete Complete this question by entering your answers in the tabs below. Required: Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the facing Bikes? Financial (diundvantage) per quarter $(552.000) Required 2 Total Dirt Bikes Mountain Bike Racing Bikes Contribution margin (loss) Traceable fixed expenses 0 0 Total traceable fixed expenses Product line segment margin (loss) 0 O 0 05 05 5 0 Net operating income foss)