2 Exercise 11-2 (Algo) Dropping or Retaining a Segment [LO11-2] 208 points 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: Sales Total $ 924,000 Dirt Bikes Mountain Bikes Racing Bikes $ 263,000 $ 404,000 $257,000 Book Fixed expenses: Hint Variable manufacturing and selling expenses Contribution margin Advertising, traceable Depreciation of special equipment 468,000 110,000 456,000 153,000 199,000 205,000 159,000 98,000 69,000 8,1001 40,100 20,800 43,700 20,800 7,500 15,400 Salaries of product-line managers 113,700 40,300 38,200 35,200 Allocated common fixed expenses 184,800 52,600 80,800 51,400 Total fixed expenses 411,200 121,800 166,600 122,800 Print Net operating income (loss) $44,800 $31,200 $ 38,400 $ (24,800) "Allocated on the basis of sales dollars. References 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