The Regal Cycle Company manufactures three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the past quarter follow: Total Dirt Bikes Mountain Bikes Racing Bikes Sales $ 921,000 $ 264,000 $ 406,000 $ 251,000 Variable manufacturing and selling expenses 479,000 119,000 209,000 151,000 Contribution margin 442,000 145,000 197,000 100,000 Fixed expenses: Advertising, traceable 69,500 8,300 40,600 20,600 Depreciation of special equipment 43,700 21,000 7,500 15,200 Salaries of product-line managers 115,000 40,300 38,200 36,500 Allocated common fixed expenses* 184,200 52,800 81,200 50,200 Total fixed expenses 412,400 122,400 167,500 122,500 Net operating income (loss) $ 29,600 $ 22,600 $ 29,500 $ (22,500) *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.) 1b. Should production and sale of the racing bikes be discontinued? Yes No 2a. Prepare a segmented income statement. 2b. Would a segmented income statement format be more usable to management in assessing the long-run profitability of the various product lines. Yes No