Exercise 13-2 (Static) 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: 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) *Allocated on the basis of sales dollars. Total $ 300,000 120,000 180,000 30,000 23,000 35,000 60,000 148,000 $ 32,000 Required 1 Mountain Bikes Dirt Bikes $ 90,000 $ 150,000 27,000 60,000 63,000 90,000 Required 2 Required 3 Complete this question by entering your answers in the tabs below. 14,000 9,000 13,000 30,000 66,000 10,000 6,000 12,000 18,000 46,000 $ 17,000 $ 24,000 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. Racing Bikes $ 60,000 33,000 27,000 6,000 8,000 10,000 12,000 36,000 $ (9,000) What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes?

Exercise 13-2 (Static) Dropping or Retaining a Segment [LO13-2] The Regal Cycle Compary 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: 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. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes? Answer is complete but not entirely correct. Complete this question by entering your answers in the tabs below. Prepare a properly formatted segmented income statement that would be more useful to management in assessing the longrun profitability of the various product lines. Complete this question by entering your answers in the tabs below. What is the financial advantage (disadvantage) per quarter of discontinuing the Racing Bikes