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 Bikes 5 926,000 S 264,000 406,000 5 258,000 460,000 112,000 94,000 154,000 Total Bikes Bikes Sales Variable manufacturing and selling expenses Contribution margin 486,000 152,000 212,000 102,000 Foxed expenses: Advertising, traceable Depreciation of special equipment 70,000 43,500 115,100 185,200 8,900 20,100 40,300 52,800 40,800 7,800 38,400 81,200 20,500 15,600 36,400 51,200 Salaries of product-ine managers Allocated common foed expenses Total fioxed expenses 13,800 22,100 168,000 123,700 Net operating income (loss) S 52,200 S 29,900 S 44,000 S (21,700) Allocated on the basis of sales dollars. Management is concemed 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 a. What is the impact on net operating income by discontinuing racing bikes? (Decreases should be indicated by a minus sign.) Total If Current Total Racing BikesIncome Are Dropped Increase or Contribution margin (loss) Fixed expenses: Total fixed expenses Net operating income (loss)