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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 Data on sales and expenses for the past quarter follow: Dirt Mountain Racing Total Bikes Bike Bikes $ 931, see $266,000 $ 486, de $ 259,000 471, eee 115,eee 198,00 158,000 460.ee 151. eee 288,Bee 101.000 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) 69,400 8,400 40,700 20,300 43,600 20, 3eo 7,300 16, eoe 116, 200 40,900 38,700 36,600 186,260 53,200 81,200 51, see 415,400 122,800 167,90e 124,780 $ 44,600 $ 28, 2ee $ 40,100 $(23,7ee) "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? Dad

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