1 Exercise 11-2 Dropping or Retaining a Segment (L011-2] 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: Sints eBook Dirt Mountain Racing Total Bikes Bikes Bikes $ 921,000 $267.000 $ 400,000 $ 254,000 462,000 116,000 194,000 152,000 459,000 151,000 206,000 102.000 Hint Print References Sales Variable manufacturing and selling expenses Contribution sargin Fixed expenses Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating income (loss) 69,200 8.400 40,300 20,500 42,900 20,200 7,400 15,300 114,600 40,600 38,300 35, 700 184,200 53,400 80,000 50,000 410.900 122,600 166,000 122,300 $ 48,100 $ 28,400 $ 40,000 $(20,300) "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. "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. Ranvier 1 Ronnier Rentired 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 0 Contribution margin (loss) Traceable fixed expenses: 0 0 0 0 Total traceable fixed expenses Product line segment margin (loss) 0 $ 0 $ 0 $ 0 Net operating income (loss) 0