Exercise 11-2 Dropping or Retaining a Segment [LO11-21 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 Hacing Total Bikes Bikes Oikes $ 929,000 $267.000 $ 409,000 5 253,000 484000 118.000 209.00 157.000 145,000 149.000 200, 360 96-000 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) 70,200 3,70 40,700 20,300 43,600 20,200 7,800 15,600 115,00 40,500 38,900 35,800 185,000 53.400 11.800 50, 500 414.300 122,900 162200 122,800 $10,100 $ 26,100 10,60 5626,500) *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 2 > Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? Yes No Required 1 Required 2 Required 3 Prepare a properly formatted segmented income statement that would be more useful to management in assessin run profitability of the various product lines. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable foxed expenses Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) Required 2