Exercise 12-2 Dropping or Retaining a Segment [L012-2] 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 474,000 449,000 Bikes 113,000 148,000 Bikes 202,000 203,000 Bikes 159,000 98,000 $923,000 $261,000 $ 405,000 $ 257,000 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* 70,100 43,800 116,200 184,600 8,900 20,800 40,400 52,200 41,000 7,500 38,800 81,000 20,200 15,500 37,000 51,400 Total fixed expenses 414,700 122,300 168,300 124,100 Net operating income (loss) $ 34,300 $ 25,700 $ 34,700 $ (26,100) 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 1a. What is the impact on net operating income by discontinuing racing bikes? (Decreases should be indicated by a minus sign.)