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	$ 924,000	$ 269,000	$ 402,000	$ 253,000
Variable manufacturing and selling expenses	464,000	110,000	196,000	158,000
Contribution margin	460,000	159,000	206,000	95,000
Fixed expenses:
Advertising, traceable	69,500	8,500	40,200	20,800
Depreciation of special equipment	43,600	20,100	7,900	15,600
Salaries of product-line managers	114,800	40,700	38,300	35,800
Allocated common fixed expenses*	179,600	52,400	80,600	46,600
Total fixed expenses	407,500	121,700	167,000	118,800
Net operating income (loss)	$ 52,500	$ 37,300	$ 39,000	$ (23,800)

*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.

rev: 02-18-2011

1.

value: 3.00 points

Required information

Requirement 1:

(a)	What is the amount of the change in net income if the racing bikes is dropped? (Input the amount as positive value. Omit the "$" sign in your response.)

(Click to select)DecreaseIncrease in net operating income

$

(b)	Should the racing bikes program be discontinued?

(Click to select)YesNo