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Exercise 11-2 Dropping or Retaining a Segment[LO11-2) The Regal Cycle Company manufactures three types of bicycles-a dirt bike, a mountain bike, and a racing bike. Data on sales and a expenses for the past quarter follow: Dirt Mountain Racing Total Bikes Bikes Bikes 5923,000 $265,eee $ 485, eee $ 253,000 468,000 112,000 284,000 152,000 455000 153,000 201,000 101,000 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) 69,500 8,208 40,300 21.000 44,00 20,700 7.300 16,000 115,600 40.800 38,200 36,600 184,680 53,000 81,00 50.600 413700 122,200 166,800 124,200 5 41,300 $ 30,300 $ 34, 2005(23,200) "Allocated on the basis of sales dollars a 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. "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 Assessment Tool Frame Required 1 Required 2 Required 3 What is the financial advantage (disadvantage) per quarter of discontinuing the racing bikes? 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? Yes ONO Prev 1 of 5 !!! Next > 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- un profitability of the various product lines. Totals Dirt Bikes Mountain Bikes Racing Bikes 0 0 0 0 Contribution margin (losa) raceable foxed expenses 0 0 0 0 tal traceable fixed expenses roduct line segment margin (loss) 0 $ 05 0 $ 0 0 met operating income (loss)

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