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: Sales Variable manufacturing and selling expenses Dirt Mountain Racing Total Bikes Bikes Bikes $ 920,000 $ 261,000 $ 409,000 $250,000 475,000 116,000 201,000 158,000 445.000 145,000 208,000 92,000 Contribution margin Fixed expenses Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 70,300 43,500 115,300 184,000 8,600 20,400 40,400 52,200 40,900 7,900 38,500 81,800 20.800 15,200 36,400 50,000 413,100 121,600 169,100 122,400 Total fixed expenses Net operating income (Loss) $ 31,900 $ 23,400 $ 38,900 $ (30,400) *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) Contribution margin (loss) Fixed expenses Total fixed expenses Net operating income (loss) 1b. Should production and sale of the racing bikes be discontinued? O 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 O No