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 $ 935,000 473,000 462,000 Dirt Bikes $ 270,000 112,000 158.000 Mountain Bikes $ 406,000 204,000 202.000 Racing Bikes $ 259,000 157,000 102.000 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 (los) 69,600 43,400 114,300 187.000 414,300 $ 47,700 8,600 20,500 40,400 54.000 123,500 $ 34,500 40,500 7,500 38,200 81,200 167,400 $ 34,600 20,500 15,400 35,700 51,800 123,400 $ (21,400) "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 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? REQUE Required 2 > Complete this question by entering your answers in the tabs below. 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 Contribution margin (loss) Traceable fixed expenses Total traceable fixed expenses Product line segment margin (loss) Net operating income (los)