Exercise 11-2 (Algo) Dropping or Retaining a Segment [LO11-2] The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: 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) *Allocated on the basis of sales dollars. Total Dirt Bikes $ 921,000 484,000 $ 261,000 437,000 117,000 144,000 Mountain Bikes $ 407,000 209,000 198,000 Racing Bikes $ 253,000 158,000 95,000 69,500 8,800 40,300 20,400 43,600 20,900 7,200 15,500 114,400 40,300 38,400 35,700 184,200 52,200 81,400 50,600 411,700 122,200 167,300 122,200 $ 25,300 $ 21,800 $ 30,700 $ (27,200) 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 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? < Required 1 Required 2 >