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) Dirt Mountain Racing Total Bikes Bikes Bikes $919,000 $263,000 $401,000 $ 255,000 469,080 110,000 204,000 155,000 450,000 153,000 197,080 100,000 69,480 8,500 40,700 20,200 43,900 20,600 7,400 15,900 115,600 40,800 38,500 36,300 183,800 52,600 80,200 51,000 412,700 122,500 166,800 123, 480 $ 37,300 $ 30,500 $ 30,200 $(23,400) "Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes and wants o 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, Net operating income (Loss) $ 37,300 $ 30,500 $ 30, *Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing the line should be discontinued. The special equipment used to produce raci Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing 2. Should the production and sale of racing bikes be discontinued? 3. Prepare a properly formatted segmented income statement that would be profitability of the various product lines. Answer is not complete. 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 Rae Required Required 2 > alysis Saved Check my work mode : This shows what is correct or incorrect for the work you have complete Net operating income (loss) $ 37,300 $ 30,500 $ 30,200 $(23,400) Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes and wants a recomm the line should be discontinued. The special equipment used to produce racing bikes has no resale val 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 managemer profitability of the various product lines. Answer is not complete. 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 asse run profitability of the various product lines. Totals Dirt Bikes Mountain Bikes Racing Bikes 0 0 0 0 Contribution margin (loss) Traceable fixed expenses
