Exercise 11-2 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. Dirt Mountain Racing Total Nikon Bike Bike $ 914,000 $263,000 $400,000 $ 251,000 465,000 117,000 190.000 150,000 449,000 146,000 202,000 101,000 Sales Variable manufacturing and selling expenses Contribution nargin Tixed expenses Advertising, traceable Depreciation of special equipment salaries of product line manager Allocated common fixed expenses Total fixed expense Not operating into clous) 69,500 8.400 40,900 20,200 43,300 20,900 300 15.100 115,000 40,600 30,000 36,400 182.300 52,600 B0,000 50.200 011/400 122,500 162000 1211200 $37,600 23.500 $35.000 (20.9003 "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. Net operating income (loan) $ 37,600 $ 23,500 $ 35,000 $(20,900) "Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing blkes 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 2 > Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Should the production and sale of racing bikes be discontinued? OYes ONO 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 () Traceable fixed expenses Total traceable forced expenses Product line segment margin (los) Not operating income (loss)