Exerclse $11-2($Algo$)$ Dropping or Retaining a Segment $[$LO$11-2]$

The Regal Cycle Company manufactures three types of bicycles$-$o dirt bike, a mountain bike, and a racing bike. Data on sales and

expenses for the past quarter follow:

$*$Allocated on the bosis of sales dollars.

Mansgement 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.

Requlred:

What is the financial advantage $($disadvantage$)$ per quarter of discontinuing the Racing Bikes?

Should the production and sale of racing bikes be discontinued?

Prepore a properly formatted segmented income statement that would be more useful to management in ossessing the long$-$run

profitability of the various product lines.

Complete this question by entering your answers in the tabs below.

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.