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 Total Bikes $ 926,000 $ 268,000 469,000 115,000 Mountain Bikes $ 405,000 202,000 Racing Bikes $ 253,000 152.000 457,000 153,000 203,000 101,000 Sales Variable manufacturing and selling expenses Contribution margin Fbced expenses Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 69,700 43,400 115,400 185,200 8,800 20,600 40,000 53,600 40,500 7,600 38,800 81,000 20.400 15,200 36,600 50,600 Total fixed expenses 413,700 123,000 167.900 122 800 Net operating income (loss) $ 43,300 $ 30,000 $ 35,100 $ (21 800) *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. 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 01 0 Contribution margin (loss) Fixed expenses 0 0 Total fixed expenses Net operating income (loss) 0 0 $ $ 0 0 $ 0 1b. Should production and sale of the racing bikes be discontinued? O Yes O No 2a. Prepare a segmented income statement. Totals Dirt Bikes Mountain Bikes Racing Bikes 0 0 0 Contribution margin (loss) Traceable fixed expenses Total traceable fixed expenses 0 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 OO No