Exercise 6-2 (Algo) Dropping or Retaining a Segment (LO6-2] 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 $267,000 $405,000 $ 253,000 473,000 113,000 206,000 154,000 452,000 154,000 199,000 99,000 Sales Variable manufacturing and selling expenses Contribution margin Pixed expenses Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating income (10) 70,500 8,500 41,000 21,000 44,000 20,900 7,100 16,000 115,800 40.800 38,100 36,900 185,000 53,400 81,000 50,600 415,300 123,600 167,200 124,500 $ 36,700 $ 30,400 $ 31,800 $(25,500) "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 quired: What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Should the production and sale of racing bikes be discontinued? Prepare a properly formatted segmented income statement that would be more useful to management in assessing the long-run fitability 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 2 > 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 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? OYes No 2. HUU UN PLUULUUIICHU SIE UITGII UIRES DE UISLU eu! 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 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 Product line segment margin (los) Net operating Income (loss)