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 Bikes $ 269,000 114,000 Total $932.000 472.000 Mountain Bakes $405,000 207.000 Racing Bakes $258.000 151,000 Sales Variable manufacturing and selling expenses Contribution margin 460,000 155 000 198 000 107 000 Fixed expenses Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses 70.100 43,200 113.500 185 400 8.800 20.800 40 300 53.800 40.500 7.300 38.200 81,000 20.800 15.100 35.000 51,600 Totalfixed expenses 413.200 $ 46,800 123.700 S 31,300 167.000 $ 31,000 122,500 $(15,500) 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 Totalf Racing Bikes Are Dropped Difference: Net Operating Income increase or (Decrease) Contribution margin (los) Fwd expenses Total foed expenses Net operating income (los) 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) 25. Would a segmented income statement format be more usable to management in assessing the long-run profitability of the various product lines. Yes No