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 $ 924, 000 466, 000 458,000 Dirt Bikes $ 269,000 117,000 152,000 Mountain Bikes $ 401,000 196,000 205,000 Racing Bikes $ 254.000 153,000 101.000 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) 70, 100 43, 700 115, 200 184, 800 413. 800 $ 44,200 8, 900 20. 200 40, 700 53, 800 123, 600 $ 28, 400 40, 900 7,800 38,400 80,200 167, 300 $ 37,700 20, 300 15, 700 36. 100 50, 800 122.900 $ 21,900) *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 line 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 Required 2 > Financial advantage (disadvantage) per quarter Financial advantage per quarter 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 $924,000 466,000 458,000 Dirt Bikes $ 269,000 117,000 152,000 Mountain Bikes $ 401,000 196,000 205,000 Racing Bikes $ 254, 000 153.000 101, 000 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) 70, 100 43,700 115, 200 184, 800 413, 800 $ 44,200 8, 900 20, 200 40, 700 53, 800 123, 600 $ 28, 400 40, 900 7,800 38, 400 80, 200 167, 300 $ 37, 700 20, 300 15, 700 36, 100 50, 800 122, 900 $ 21, 900) *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. 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 No Net operating income (loss) $ 44,200 $ 28, 400 $ 37, 700 $ (21,900) *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. 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 0 0 0 Contribution margin (loss) Traceable fixed expenses 0 0 Total traceable fixed expenses Product line segment margin (loss) 0 0 $ 0 0 0 S 0 $ Net operating income (loss) $ 0