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: Total $ 914,000 422.000 437,000 Dirt Bike $ 263,000 113.000 150,000 Mountain Bike $ 401,000 206.000 195,000 Hacing bikes $ 250,000 158,000 92.000 Salee Variable manufacturing and selling expenses Contribution margin Fixed expenses Advertising, traceaba Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Het operating income (los) 70,000 43,000 115.500 102 800 412,100 $ 24,900 5,500 20.200 40.700 52.600 122,000 $ 20,000 40,900 7,600 38,200 10.200 166,000 $ 20,100 20,600 16,000 36,600 50.000 123,200 $31,200) "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 hos 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 1 Required 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? Yes ONO 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. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss)