Exercise 12-2 Dropping or Retaining a Segment (L012-2] 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 $ 932,000 $265,000 $ 410,000 $ 257,000 457.000 111,000 193,000 153,000 475,000 154,000 217,000 104,000 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 8,800 40,900 20,500 43,900 20,700 7,500 15,700 115,400 40,300 38,600 36,500 186,400 53,000 82,000 51,400 415.900 122,800 169,000 124, 100 $ 59,100 $ 31,200 $ 48,000 $(20, 100) es "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 in the financial Aid Arman Herria Phan Alle 1 oints Management is about the continued losses shown by the racing bikes and wants a recommendation as the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does Skipped 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 assess profitability of the various product lines. eBook Complete this question by entering your answers in the tabs below. Hint Required 1 Required 2 Required 3 Print Prepare a properly formatted segmented income statement that would be more useful to management in assessing the run profitability of the various product lines. Dirt Bikes Mountain Bikes Racing Bikes References Totals Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss) TW
