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 Racing Total Bikes Mountain Bikes Bikes $400,000 $258,000 Sales S 926.000 268,000 Variable manufacturing and selling expenses Contribution margin ed ing traceable 459,000 111.000 192,000 156,000 467,000 157,000 208,000 102,000 69,500 43,600 115,000 185,200 8,400 40.800 20,300 15,400 Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 20,500 7,700 38,600 80.000 40,400 53,600 36,000 51.600 Total fixed expenses 413,300 122,900 167,100 123,300 S 53,700 40,900 $ (21,300) 34,100 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 eq produce racing bikes has no resale value and does not wear out used Required: 1a. What is the impact on net operating income by discontinuing racing bikes? (Decreases should be indicated by a minus sign.) 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 Bikes Are Operating Income Increase or (Decrease) Current Total Dropped Sales 668,000 $ $ (258,000) 926,000 Variable manufacturing and selling expenses (156,000) 303,000 459,000 Contribution margin (loss) 467,000 (102,000) 365,000 Fixed expenses 49,200 Advertising, traceable 20,300 69,500 43,600 Depreciation on special equipment 43,600 79,000 Salaries of product managers 115,000 36,000 185,200 185,200 Common allocated costs Total fixed expenses 413,300 357,000 56,300 Net operating income (loss) 53,700 8,000 (45,700) 2a. Prepare a segmented income statement. Mountain Bikes Totals Dirt Bikes Racing Bikes Contribution margin (loss) 0 0 0 0 Traceable fixed expenses: Total traceable fixed expenses 0 0 0 0$ $ 0 0 0 Net operating income (loss) $ 0 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