Exercise 12-2 Dropping or Retaining a Segment [LO12-2] 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 5 922,000 S 288,000 404,000 5 252,000 472,000 19,000 98,000 155,000 Total Bikes Bikes Sales Variable manufacturing and selling expenses Contribution margin Foxed expenses Depreciation of special equipment 450,000 147,000 206,000 97,000 70,400 43,200 113,700 184,400 8,700 20,200 40,200 53,200 40,700 7,900 38,000 80 21,000 15,100 35,500 50,400 Salaries of product-ine managers Allocated common foed expenses 80,800 Total fioxed expenses 411,700 22,300 17,400 122,000 Net operating income (loss) S 38,300 S 24,700 S 38,600 S (25,000) 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 Decreas Contribution margin (loss) Fixed expenses: Total fixed expenses Net operating income (loss)