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 Dirt Mountain Racing Total Bikes Bikes Bikes $ 925,000 $264,000 $401,000 5 260,000 465,000 110,000 204,000 151,000 460,000 154,000 197.000 109,000 es Sales Variable manufacturing and selling expenses Contribution margin Fixed expensesi Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating income (loss) 69,900 8,500 40,800 20,600 43,200 20,200 7,800 15,200 114,000 40,000 38,800 35,200 185.000 52,800 80,200 52,800 412,100 121,500 167,600 123,000 $ 47,900 $ 32,500 $ 29,480 $(14,000) *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? 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 le profitability of the various product lines Book Complete this question by entering your answers in the tabs below. Hint Required 1 Required 2 Required 3 Hences What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Required 2 > ok Complete this question by entering your answers in the tabs below. ht int Required 1 Required 2 N Required 3 nces 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 assessing the lon run profitability of the various product lines. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses Total traceable fixed expenses Product line segment margin (loss) Net operating income (loss)