Exercise 11-2 Dropping or Retaining a Segment (LO11-2] The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the post quarter follow Dirt Mountain Racing Total Bikes Bikes Bikes $ 928,000 $270,000 $402,000 $ 256,000 485,000 119,000 210,000 156,000 443,000 151,000 192,000 100,000 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 (105) es 70,600 8,900 40,700 21,000 44,5 20,800 7,900 15,800 116,200 40,500 38,900 36,809 185,600 54,000 80,400 51,200 416,900 124,209 167.900 124,800 $ 26,100 $ 26,800 $ 24,100 $(24,800) "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 Required 2 > 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. Dirt Bikes Mountain Bikes Racing Bikes Totals 0 0 Contribution margin (loss) Traceable fixed expenses: 0 0 Total traceable fixed expenses Product line segment margin (loss) 0 0 0 $ 0 0 $ 0 $ 0 Net operating income (loss) $ 0