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: Dirt Mountain Racing Total Bikes Bikes Bikes $933,000 $269,000 $ 406,000 $ 258,000 467,000 115,000 197,000 155,000 466,000 154,000 209,000 103,000 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) 69,400 43,900 114,600 186,600 414,500 $ 51,500 8,300 20,900 40,500 53,800 123,500 30,500 40,500 20,600 7,600 15,400 38,700 35, 400 81,200 51,600 168,000 123,000 41,000 $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 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? Financial (disadvantage) per quarter $ 45,700 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 0 Sales Variable manufacturing and selling expenses Contribution margin (loss) Traceable fixed expenses: Advertising Depreciation of special equipment Salaries of the product line managers Total traceable fixed expenses Product line segment margin (loss) 0 0 0 0 0 $ 0 $ 0 $ 0 Common fixed expenses Net operating income (loss) $ 0