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 Mountain Racing Bikes Total $922,000 $ 261,000 460,000 Bikes Bikes $ 253,000 152,000 $ 408,000 191,000 Sales Variable manufacturing and selling expenses 117,000 Contribution margin 462,000 144,000 217,000 101,000 Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses 20,200 15,500 35,200 50,600 8,800 20,100 40,800 52,200 70,000 43,500 114,600 184,400 41,000 7,900 38,600 81,600 Total fixed expenses 169,100 121,500 412,500 121,900 (20,500) 49,500 22,100 47,900 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.) Difference: Net Total If Racing Operating Income Increase or Current Total Bikes Are Dropped (Decrease) Contribution margin (loss) Fixed expenses: Total fixed expenses Net operating income (loss) 1b. Should production and sale of the racing bikes be discontinued? 1b. Should production and sale of the racing bikes be discontinued? Yes 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) 0O