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 5 926,000 474,000 452,000 Dirt Bikes $ 264,000 111,000 153,000 Mountain Bikes $ 407,000 219.000 197,000 Racing Bikes $ 255,000 153,600 102,000 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 Incone (loss) 69,300 43,700 115,400 185,200 413,600 $ 38,400 8,400 20,400 40,300 52,800 121,900 $ 31,100 40,100 2,700 38,400 81,400 167,600 $ 29,400 20,800 15,600 36,700 51,000 124,100 $ (22,100) "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 thenroduction and sale of racing bikes he discontinued? Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? 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 Required 1 Required 2 Required 3 m 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) Net operating income (oss)