Exercise 11-2 (Algo) 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: Total Sales $ Dirt Bikes $ Mountain Bikes Racing Bikes $ $ 931,000 266,000 409,000 256,000 Variable manufacturing and selling expenses 465,000 Contribution margin 119,000 196,000 466,000 147,000 213,000 106,000 150,000 Fixed expenses: Advertising, traceable 69,800 8,700 40,600 20,500 Depreciation of special 44,100 20,900 7,400 15,800 equipment Salaries of product-line 114,600 40,100 38,300 36,200 186,200 53,200 81,800 414,700 51,200 122,900 168,100 123,700 $ (17,700) managers Allocated common fixed expenses* Total fixed expenses Net operating income (loss) *Allocated on the basis of sales dollars. $ 51,300 $ 24,100 $ 44,900 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 Required Required 1 2 3 What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? < Required 1 Required 2 >