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?

Sales Variable manufacturing and selling expenses Dirt Mountain Racing Total Bikes Bikes Bikes $920,000 $267000 $400,000 $253.000 466,000 111,000 201,000 154.000 Contribution margin 454.000 156,000 199.000 99.000 Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses 69,900 44,100 113,900 184,000 8,800 20.900 40.100 53,400 40,100 7,600 38.500 80.000 21.000 15,600 35,300 50.600 Total fixed expenses 111,900 28,200 166,200 122,500 Net operating income (loss) $ 42,100 $32,800 $ 32.800 $ (23.500) *Allocated on the basis of sales dollars. Management is concerned about the continued losses shown by the racing bikes a wants a recommendation as to whether or not the line should be discontinued. I special equipment used to produce racing bikes has no resale value and does not we out. Required: 1a. What is the impact on net operating Income by discontinuing racing bike (Decreases should be indicated by a minus sign.) Total If Current Total Racing Bikes Are Dropped Difference: Net Operating Income Increase or (Decrease) 0 0 0 Contribution margin (loss) Fixed expenses Totalfixed expenses Net operating income (loss) OS 0 $ 0