Exercise 13-2 (Algo) Dropping or Retaining a Segment [LO13-2] 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: 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) "Allocated on the basis of sales dollars. Total $ 937,000 Dirt Bikes 464,000 473,000 $ 269,000 111,000 158,000 Mountain Bikes $ 409,000 202,000 207,000 Racing Bikes $ 259,000 151,000 108,000 69,500 8,600. 40,200 20,700 44,400 20,800 7,800 15,800 115,100 40,500 38,500 36,100 187,400 53,800 81,800 51,800 416,400 123,700 168,300 124,400 $ 56,600 $ 34,300 $ 38,700 $ (16,400) 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. 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 manage 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: 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 asse profitability of the various product lines. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? Yes ONO < Required 1 Required 3 > 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. Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses. Totals Dirt Bikes Mountain Bikes Racing Bikes Product line segment margin (loss) Net operating income (loss) < Required 2 Required 3>