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2 Exercise 11-2 Dropping or Retaining a Segment [LO11-2] Book H 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 Sales $919,000 $269,000 $400,000 $250,000 Variable manufacturing and selling 482,000 118,000 200.000 158,000 expenses Contribution margin 437,000 151,000 194,000 Fixed expenses: Advertising, traceable 69,600 8,900 40,500 20,200 Depreciation of special equipment 43,500 20,200 7,600 15,700 Salaries of product line managers 116,100 40, 400 39,000 36,700 Allocated common fixed expenses 183, 800 53,800 BO,000 50,000 Total fixed expenses 413,000 123,300 167,200 5:22,600 Net operating income (loss) $ 24,000 $ 27,700 5 26,900 5(39,600) "Alocated 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 ine 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. 2 bits *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. Hir Print Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? Regu Required 2 > *Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing the line should be discontinued. The special equipment used to produce raci Required: 1. What is the financial advantage (disadvantage) per quarter of discontinuing 2. Should the production and sale of racing bikes be discontinued? 3. Prepare a properly formatted segmented income statement that would be profitability of the various product lines. 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? Ores O No

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