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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 Bikes $ 268,000 120,000 Total $ 931,000 470,000 Mountain Bikes $ 409,000 197,000 Racing Bikes $ 254,000 153,000 Sales Variable manufacturing and selling expenses Contribution margin 461,000 148,000 212,000 101,000 Fixed expenses: Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses 70.200 43,400 115,400 186,200 8,600 20,800 40,800 53,600 40,900 7,400 38,000 81,800 20,700 15,200 36,600 50,800 Total fixed expenses 415,200 $ 45,800 123,800 $ 24,200 168,100 $ 43,900 123,300 $ (22,300) Net operating income (loss) *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) Fixed expenses: Total fixed expenses Net operating income (loss) ON S OLS 1b. Should production and sale of the racing bikes be discontinued? Yes O No 2a. Prepare a segmented income statement. Totals Dirt Bikes Mountain Bikes Racing Bikes Contribution margin (loss) Traceable fixed expenses: Total traceable fixed expenses 0 0 0 0 0 $ $ $ Net operating income (loss) $ 0 2b. Would a segmented income statement format be more usable to management in assessing the long- run profitability of the various product lines. Yes