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:

Dirt Mountain Racing Total Bikes Bikes Bikes $ 922,000 $265,000 $ 401,000 $256,000 468,000 114,000 194,000 160,000 454,000 151,000 207,000 96,000 Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating income (loss) 69,700 44,000 115,600 184,400 8,600 20,900 40,200 53,000 40,600 7,300 38,700 80,200 20,500 15,800 36,700 51,200 413,700 122,700 166,800 124,200 $ 40,300 $ 28,300 $ 40,200 $ (28,200) *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.) Current Total Total If Racing Bikes Are Dropped Difference: Net Operating Income Increase or (Decrease) 0 0 0 Sales Variable manufacturing and selling expenses Contribution margin (loss) Fixed expenses: Advertising, traceable Depreciation on special equipment Salaries of product managers Common allocated costs Total fixed expenses Net operating income (loss) 0 0 $ 0 $ 0 $ 0 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) 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