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Exercise 11-2 Dropping or Retaining a Segment [LO11-2) 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. Mountain Racing Total Bikes Bikes Bikes $ 922,000 $264,000 $403,000 $, 255,000 475,000 117,000 203,000 155,000 447,000 147.000 200.000 100,000 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 (loss) 69,400 8,700 40,500 20,200 43,200 20,500 7,100 15,600 115,000 40,600 38,500 35,900 184,400 52,800 80.600 51,000 412,000 122.600 166,700 122,700 $ 35,000 $ 24,400 $33,300 $(22,700) *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 property formatted segmented income statement that would be more useful to management in assessing the long-run profitability of the various product lines. "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 whethe the line should be discontinued. The special equipment used to produce racing bikes has no resale value and does not wear 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 lo profitability 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? Financial (disadvantage) per quarter Required 1 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 the long 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 0 0 0 Contribution margin (loss) Traceable fixed expenses 0 0 0 Total traceable fixed expenses Product line segment margin (lons) 0 0 s 0 0 Net operating income (los) S 0