Exercise 13-2 (Algo) Dropping or Retaining a Segment (LO13-2] 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 $924.000 475.000 449.000 Dirt Bikes $ 263.000 118.000 144.000 Mountain Blow 5.408.000 204.000 1204.000 Racing Bikes 3.254.000 153,000 101. 000 Sales Variable manufacturing and selling expenses Contribution margin Fixed oxponton Advertising traceable Depreciation of special equipment Salarion of product-line managers Allocated connon tixed expenses Total fixed exponses Not operating income (10) 69, 900 43.800 115.500 184, 800 414.000 $ 35,000 8.400 20,400 10.900 52.400 12.100 3. 21. 900 40,000 7. 400 38. 900 81.600 1680300 $ 35,500 20.900 15,000 35. 700 50.800 122.400 $ (22.400) "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: '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 cliscontinued? 3. Prepare a properly formatted segmented Income statement that would be more useful to management in assessing the long-run profitability of the varlous 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 (disadvantage) per quarter Round 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 No 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 Sales Variable manufacturing and selling expenses Contribution margin (loss) 0 0 Traceable fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of the product line managers 0 Total traceable fixed expenses 0 0 0 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 Sales Variable manufacturing and selling expenses Contribution margin (loss) 0 0 0 0 Traceable fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of the product line managers Total traceable fixed expenses 0 0 0 0 0 $ Product line segment margin (loss) 0 $ 0 $ 0 Common fixed expenses $ 0 Net operating income (loss)