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The Royal Cycle Company produces three types of bicyclesa dirt bike, a mountain bike, and a racing bike. Data on sales and expenses for the

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The Royal Cycle Company produces three types of bicyclesa 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 ................................... $300,000 $90,000 $150,000 $60,000 Variable manufacturing and selling expenses ................ 120,000 27,000 60,000 33,000 Contribution margin ............. 180,000 63,000 90,000 27,000 Fixed expenses: Advertising, traceable ........ 30,000 10,000 14,000 6,000 Depreciation of special equipment ...................... 23,000 6,000 9,000 8,000 Salaries of the product line managers ....................... 35,000 12,000 13,000 10,000 Allocated common xed expenss .......................... 60,000 18,000 30,000 12,000 Net Operating Income (loss) $32,000 M M 512% 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. Would operating income increase or decrease and by what amount if the Racing Bikes Line were dropped

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