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 $927,000 $263,000 $410,000 $ 254,000 485,000 119,000 207,000 159,000 442,000 144,000 203,000 95,000 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) 69,500 8,900 40,200 20,400 43,700 20,900 7.600 15,200 116,200 40,900 38,900 36,400 185,400 52,600 82,000 50, Bee 414,800 123,300 168, 700 122,800 $ 27,200 $ 20,700 $ 34,300 $(27,880) "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 managenfent in assessing the long-run profitability of the various product lines. Complete this question by entering your answers in the tabs below. 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 a What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? Required 2 > Complete this question by entering your answers in the tabs below. Book Hint 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. Print Totals Dirt Bikes Mountain Bike Racing Bikes erences Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss)