Exercise 11-2 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: points Dirt Mountain Racing Total Bikes Bikes Bikes $ 930,000 $268,000 $ 405,000 $ 257,000 476,000 119,000 199,000 158,000 454,000 149,000 206, 000 99,000 eBook Print 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) 69,700 8,400 42,700 20,200 114,700 40,700 186,000 53,600 413,100 122,900 40,900 $ 26,100 $ 40,500 20,800 7,200 15,300 38,000 36,000 81,000 51,400 166,700 123,500 39,300 $(24,500) References $ "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 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 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 Contribution margin (loss) Traceable fixed expenses: 0 Total traceable fixed expenses Product line segment margin (loss) 1 0 $ 0 % 0 % 0 Net operating income (loss) $ 0