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 $ 918,000 462,000 450,000 Dirt Bikes $268.000 111.000 155.000 Mountain Bikes $ 400.000 198.000 202,000 Racing Bikes $252,000 153.000 99,000 Sales Variable manufacturing and selling expenses Contribution margin Fixed expenses Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses Net operating income (loss) 68,900 42,800 115,800 183,600 8.500 20.200 40.200 53.200 40.200 7.100 39.000 80.000 20,200 15.500 38.800 50.400 411,100 44,900 122.100 $32.900 168,300 $ 35,700 122,700 S (23.700) S *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) Foxed expenses Total fixed expenses Net operating income (loss) 1b. Should production and sale of the racing bikes be discontinued? O Yes O No