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: Mountain Total Dirt Bikes Bikes Racing Bikes Sales $933,000 $ 270,000 $ 406,000 $ 257,000 Variable manufacturing and selling expenses 450,000 112,000 194,000 152,000 Contribution margin 475,000 158,000 212,000 105,000 Fixed expenses Advertising, traceable 69,300 8,400 40,100 20,800 Depreciation of special equipment 43.800 20,500 7.400 15,900 Salaries of product-line managers 113,900 40,200 38,200 35,500 Allocated connon fixed expenses 106,600 56.000 B1,200 51,400 Total fixed expenses 413,600 123, 100 166.900 123,600 Met operating incone (los) $ 61,400 $ 34,900 $ 45,100 5 (10,600) "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. 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 manageme 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? Record 1 Required 2 > 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 Bike Racing Bikes 0 0 0 Contribution margin (loss) Traceable fixed expenses: 0 0 0 0 Total traceable fixed expenses Product line segment margin (loss) 0 $ $ 0 $ 0 Net operating income (loss) 0