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Exercise 13-2 (Algo) Dropping or Retaining a Segment (L013-2) The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a

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Exercise 13-2 (Algo) Dropping or Retaining a Segment (L013-2) 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 $931,000 $268.000 3409,000 $ 254,000 471,000 112,000 204,000 155,000 460,000 156,000 205,000 99,000 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 incone (loss) 69,960 B, 500 40,500 20,900 42,500 20,200 7.100 15,300 115,800 40,000 38,900 36,100 186,200 53,600 81,300 50.800 414,500 123 100 168,300 123, 100 $ 45,500 $ 32,900 $ 36,700 $(26,100) "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? 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 > Complete this question by entering your answers in the tabs below. 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. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses 0 0 0 Total traceable food expenses Product Ine segment margin (105) o 0 0 0 OS 0 $ 0 0 Net operating income (osa) $ 0 Required 2

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