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 Bikes Bikes Total Bikes Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: $ 300,000 90,000 150,000 60,000 120,00027,00060,00033,000 27,000 180,000 63,000 90,000 6,000 8,000 10,000 12,000 36,000 $ 32,000 $17,000 24,000 (9,000) Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 30,000 10,000 14,000 9,000 13,000 30,000 66,000 23,000 6,000 5,000 12,000 60,000 18,000 148,00046,000 Total fixed expenses Net operating income (loss) 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 1Required 2Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? Required 2> Required 1 Required 1Required 2Required 3 Should the production and sale of racing bikes be discontinued? OYes ONo K Required 1 Required 3 Required 1 Required 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 Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) Required 2 Required3