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 Hountain Racing Total Bikes Bikes Bikes $.928,000 $264,000 $ 407,000 $ 257,000 465,000 113,000 192,000 160.000 463,000 151,000 215,000 97,000 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 (loss 70,500 8,900 40,900 20,700 44,200 20,900 7,400 15,900 114,500 40,900 38,400 35.200 185,600 52.800 81,400 51,400 414,800 123,500 163, 100 123,200 $ 48,200 5 27,500 $ 46,900 $(26,200) "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 in than he went that in the narrator annat A dd) ENG Check my wo "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? Financial advantage per quarter