Exercise 11-2 (Algo) Dropping or Retaining a Segment[LO11-2) The Regal Cycle Company manufactures three types of bicycles-a dit bike, a mountain bike, and a racing bike Data on sales and expenses for the past quarter follow Huntain Total Dirt bikes Bikes Hacker Sales 590.00 $ 267,000 5.403,000 5259.000 Variable manufacturing and selling expenses 112,000 191.000 157.000 Contribution martin 466,00 102,000 Exed expenses Advertising traceable 69.700 3,400 41,000 20,100 Depreciation of Special equipment 43.400 20,600 72200 15.600 Salaries of product line manager 114,100 40,500 38,500 35.100 Allocated on fixed expenses 114.3 52,400 110.000 51,00 Total Fixed expenses 121.000 16700 122,300 Net operating incon (los) $ 52,00 $ 20,100 .44,700 5 (20,000) 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 property 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 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Required 2 > "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 property 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 (loss)
