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 $ 927.000 463.000 464,000 Dirt Bikes $262.000 111.000 151.000 Mountain Bikes $ 406,000 195.000 211.000 Racing Bikes $259,000 157.000 102.000 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) 70,400 43,700 115,100 185,400 9.000 20.100 40,300 52.400 121,800 $ 29,200 40.800 7.700 38.900 81,200 20.800 15.900 35,900 51,800 124,400 (22.400) 414,600 168.400 $ 42,800 $ 49.400 *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) Foced expenses Total fixed expenses Net operating income (loss) 1b. Should production and sale of the racing bikes be discontinued? O Yes O No