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: Sales Variable manufacturing and selling expenses Dirt Mountain Racing Total Bikes Bikes Bikes $ 925,000 $ 262,000 $ 408,000 $ 255,000 468,000 113,000 201,000 154,000 457,000 149,000 207,000 101,000 Contribution margin Fixed expenses Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 69,600 43,500 114,200 185,000 8,400 20,700 40,000 52,400 40,900 7,400 38,000 81,600 20,300 15,400 36,200 51,000 Total fixed expenses 412,300 121,500 167,900 122.900 Net operating income (loss) $ 44,700 $ 27,500 $ 39,100 $ (21,900) *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 Contribution margin (loss) Fixed expenses: 0 0 0 Total fixed expenses Net operating income (loss) $ 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 0 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. O Yes No