Exercise 10-2 Dropping or Retaining a Segment [LO10-2 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 BikesBikes Bkes 300,000 5 90,000 $150.000 60,000 Vaniable manufacturing and seling expenses 000 27.000 60.000 33,000 Sales Contnibution margin 180,000 63.000 90.000 27.000 Fixed expenses 30,000 10,000 14.0006,000 23.000 6.0009000 8.000 35.000 12,000 13.000 10.000 60,000 18000 30,00012,000 Allocated common fixed expenses Total fixed expenses Net operating income (loss) 148,000 46.000 ,000 3.000 S 32.000 $ 17,000 $ 24.000 (9.000) 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 ine should be disconinued 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) Difference: Net Total IfOperating Current Total Racing BikesIncome Are Dropped Inerease or Decrease) Contribution margin (loss) Fixed expenses Total fxed expenses Net operating income (oss) racing bkes be disconsnued