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 $ 930,000 $268,000 $ 410,000 $ 252,000 469,000 110,000 202.680 157,000 461,000 158.000 200,000 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 tiet operating income (loss) 70,000 8,800 40,600 20,600 44,400 20,600 7,900 15,900 114,400 40,200 38,900 35,300 186.000 53.600 82.000 50,400 414,500 120x200 169400 122,200 3.46,200 $ 34,800 338,600 $(27,200) "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. "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? AQUA 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 0 0 0 Contribution margin (loss) Traceable fixed expenses 0 0 0 0 Total traceable fixed expenses Product line segment margin (loss) 0 $ 0 $ 0 $ 0 Net operating income (108) $ 0