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: Mountain Racing Bikes Total Bikes Bikes $ 920,000 $ 263,000 $ 405,000 $ 252,000 467,000 111,000 198,000 158,000 Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: 453,000 152,000 207,000 94,000 69.400 44,000 .200 40,500 20,700 7.700 15,700 Advertising, traceable Depreciation of special equipment Salaries of product-ine managers Allocated common fixed expenses 20,600 15,600 40,200 38,800 36,600 184,000 52,600 81,000 50,400 413,000 121,600 168,000 123,400 s 40,000 30,400 39,000 (29,400) Total fixed expenses 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. a. 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 Dropped Income Operating Current Total Increase or (Decrease) Sales Variable manufacturing and selling expenses Contribution margin (loss) Fixed expenses: Advertising, traceable Depreciation on special equipment Salaries of product managers Common allocated costs T 69,400 Total fixed expenses 69,400)$ Net operating income (loss) 1b. Should production and sale of the racing bikes be discontinued? Yes No 2a. Prepare a segmented income statement. Dirt Bikes Mountain Bikes Racing Bikes Totals Sales Variable manufacturing and selling expenses Contribution margin (loss) Traceable fixed expenses: Advertising Depreciation of special equipment Salaries of the product line managers Total traceable fixed expenses Product line segment margin Common fixed expenses Net operating income (loss) 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