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 Mountain Racing Total Bikes Bikes Bikes Sales 924,000 266,000 405,000 253,000 466,000 117,000 90,000 159,000 Variable manufacturing and selling expenses Contribution margin 458,000 149.000 215,000 94,000 Fixed expenses Advertising, traceable 69,700 8,600 40.300 20,800 44,700 20.700 Depreciation of special equipment 8.000 16.000 Salaries of product-ine managers 116,100 40,900 38,500 36,700 184,800 53,200 50,600 Allocated common fixed expenses' 81.000 415,300 123,400 167,800 124,100 Total fixed expenses Net operating income (loss) 42,700 25,600 47,200 (30,100) "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.) Total Difference: Net If Racing Operating Income Bikes Are Current Total Increase or Dropped (Decrease) Contribution margin (loss) Fixed expenses Total fixed expenses Net operating income (loss) 1b. Should production and sale of the racing bikes be discontinued? Yes No