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 Bikes Bikes Bikes $920,000 $262,800 $ 403,000 $ 255,000 463,000 111,000 200,000 152,000 457,880 151,080 203,000 183,000 Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-Line managers Allocated conmon fixed expenses. Total fixed expenses Net operating income (loss) 69,900 8,400 40,700 20,800 43,400 20,600 7,100 15,700 114,700 40,500 38,500 35,700 184,000 52,400 89,600 51,000 412,000 121,900 166,900 123,200 $ 45,000 $ 29,100 $ 36,100 $(20, 200) 5 "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 rnmolote thir muntin "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? Required 2 > 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 Bikes Racing Bikes Contribution margin (los) Traceable fixed expenses Tot aceable fed expenses Product line segment margin (0) Not operating income (los)