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: d Dirt Mountain Racing Total Bikes Bikes Bikes $ 925,000 $264,000 $ 407,000 $ 254,000 460,000 115,000 194,000 151,000 465,000 149,000 213,000 103,000 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 income (lons) 69,600 8,300 40,400 20,900 43,900 20,700 7.500 15,700 114,100 40,400 38.400 35,300 185,000 52,800 81,400 50,800 412,600 122,200 167.700 122,700 $ 52,400 $ 26,800 $ 45,300 $(19,700) "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 Drav 2 of 6 HII Next > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the financial ao Tantage (disadvantage) per quarter of discontinuing the Racing Bikes? Roux Required 2 > 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 O No Complete this question by entering your answers in the tabs below. ces Required 1 Required 2 Requires 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: Total traceable fixed expenses Prepare a properly formatted segmented income statement that would be more useful to management in as 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)