Exercise 11-2 (Algo) 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: Total $ 930,000 471,000 459,000 Dirt Bikes $ 270,000 118,000 152,000 Mountain Bikes $ 400,000 196,000 204,000 Racing Bikes $ 260,000 157,000 103,000 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 (10) 69,600 43,100 115,000 186,000 413,700 $ 45,300 8,300 20,200 40,600 54,000 123, 100 $ 28,900 40,500 7,700 39,000 80,000 167,200 5 36,800 20,800 15,200 35,400 52.000 123,400 $ (20,400) "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 hos no resale value ond 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, 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 > Exercise 11-2 (Algo) 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: Total $ 930,000 471,000 459,000 Dirt Bikes $ 270,000 118,000 152,000 Mountain Bikes $ 400,000 196,000 204,000 Racing Bikes $ 260,000 157,000 103,000 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 (103) 69,600 43,100 115,000 186,000 413,700 $ 45,300 8,300 20,200 40,600 54,000 123,100 $ 28,900 40,500 7,700 39,000 80,000 167,200 $ 36,800 20,800 15,200 35,400 32,000 123,400 $ (20,400) "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 hos no resale value and does not wear out. Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Blikes? 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 Lequired 2 Required 3 Should the production and sale of racing bikes be discontinued? Yos ONO 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 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. Totals Dirt Bikes Mountain Bike Racing Bikes Contribution margin (los) Traceable fixed expenses Total traceable fixed expenses Product line segment margin (0) Net operating income (los)