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:

	Total				Dirt Bikes				Mountain Bikes				Racing Bikes
Sales	$	926,000			$	270,000			$	406,000			$	250,000
Variable manufacturing and selling expenses		461,000				113,000				193,000				155,000
Contribution margin		465,000				157,000				213,000				95,000
Fixed expenses:
Advertising, traceable		70,000				8,900				40,400				20,700
Depreciation of special equipment		44,000				20,900				7,900				15,200
Salaries of product-line managers		114,000				40,400				38,200				35,400
Allocated common fixed expenses*		185,200				54,000				81,200				50,000
Total fixed expenses		413,200				124,200				167,700				121,300
Net operating income (loss)	$	51,800			$	32,800			$	45,300			$	(26,300)

*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.)

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: Racing Bikes $250,000 155,000 95,000 Dirt Bikes Total Mountain Bikes Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses $ 926,000 461,000 465,000 406,000 193,000 213,000 S 270,000 113,000 157,000 70,000 4,000 114,000 185,200 40,400 7,900 38,200 81,200 20,700 15,200 35,400 50,000 8,900 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses* 20,900 40,400 54,000 167,700 121,300 (26,300) Total fixed expenses 413,200 124,200 Net operating income (loss) 51,800 32,80045,300 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 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.) Total If Racing Bikes Are Dropped Difference: Net Increase or Decrease) Operating Income Current Total ales 926,000 ariable manufacturing and selling expenses 926,000 Contribution margin (loss) Fixed expenses Advertising, traceable Depreciation on special equipment Salaries of product managers Common allocated costs 185,200 Total fixed expenses 185,200