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: Total $ 920,000 474,000 446,000 Dirt Bikes $263,000 115,000 148,000 Mountain Bikes $ 405,000 209,000 196,000 Racing Bikes S 252.000 150,000 102,000 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 70,500 43,700 115,500 184,000 8,800 20,700 40.200 52,600 40.700 7.800 38,400 81,000 167,900 $ 28,100 21,000 15,200 36,900 50,400 123,500 S (21,500) 413,700 $ 32,300 122,300 $ 25,700 Net operating income (loss) *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.) Current Total Total If Racing Bikes Are Dropped Difference: Net Operating Income Increase or (Decrease) Contribution margin (loss) Fixed expenses Total fixed expenses Net operating income (loss) 1b. Should production and sale of the racing bikes be discontinued? Yes O No 2a. Prepare a segmented income statement. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses Net operating income (loss)