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 Mountain Racing Total Bikes Bikes Sales $930,000 270,000 $ 404,000 256,000 476,000 110,000 207,000 159.000 Variable manufacturing and selling expenses Contribution margin Fixed expenses: 454,000 160,000 197 ,000 97,000 20,700 15,700 35,400 51,200 8,300 40,900 7.600 39,000 80,800 69,900 44,000 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 40,100 54,000 186,000 Total fixed expenses 414,400 123,100 168 123,100 68,300 23000 Net operating income (loss) S 39,600 S 36,900 S 28,700 S (26,000) 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.) Difference: Net Operating Income Increas or (Decrease) Total If Current Total Racing Bikes Are Dropped Contribution margin (loss) Fixed expenses 0 0 Total fixed expenses Net operating income (loss) 0 0 0 0 S 0 S 0