Exercise 13-2 (Algo) Dropping or Retaining a Segment (L013-2) The Regal Cycle Company manufactures three types of bicycles a dirt bike, a mountain bike, and a racing bike. Dots on sales and expenses for the past quarter follow, Dirt Mountain Racing Total Bikes Bikes Bikes $ 925,000 $262.000 $404,000 $ 259,000 424,000 115,000 201,000 158,000 451,000 147,000 203,000 101,000 Sales Variable manufacturing and selling expenses Contribution margin Pixed expenses Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating incone (loss) 69,800 8,900 40,300 20,600 42,900 20,600 7.100 15,200 114,800 40.800 38,800 35,200 185,000 52,400 30.800 51,800 412,500 122, 700 167,000 122,800 $ 38,500 $ 24,300 $ 36,000 $121,800) "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. Answer is not complete. 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 (disadvantage) per quarter 56 $ Che 12 Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 1 points 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. eBook Totals Dirt Bikes Mountain Bikes Racing Bikes Hint Print References 0 0 0 0 Contribution margin (loss) Traceable fixed expenses 0 0 0 0 Total traceable fixed expenses Product line segment margin (loss) 0 $ 0 $ 0$ 0 $ 0 Net operating income (loss)