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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 Mountain Racing Bikes S 918,000 287,000 400,000 251,000 Total Bikes Bikes Sales 463,000 113,000 190,000 160,000 Variable manufactuning and salling expenses Contribution margin Fixed expenses: 455,000 54.000 210,000 91,000 69.600 44.100 114.200 183.800 8,800 20.500 40,300 53.400 40.300 7.800 38.700 80.000 20,500 15,800 35,200 50,200 Advertising, traceable Depreciation of special equipment Salaries of product-line managers Allocated common fixed expenses Total fixed expenses 11.500 23,000 88.800 21700 Net operating income (loss) $ 43,500 31,000 43.200 (30,700) Allocated on the basis of sales dollars Management is concemed 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.) Difference: Net Total if Racing Bikes Are operating Current Total Increase or Decrease) e manufacturing and selling expenses Contribution margin (loss) Fixed oxponses Advertising, troceable on special equipment Salaries of product managers Common allocatod costs Total fixed expenses Net operating income (loss) 1b. Should production and sale of the racing bikes be discontinued? Yes No 2a. Propare a segmented income statement. Totals Dirt Bikes Mountain Bikes Racing Bikes e manufacturing and selling expenses Contribution margin (loss) Traceable fixed expenses Advertising Depreciation of special equipment Salaries of the product line managers Total traceable fixed expenses f line segment margin fixed expenses Net operating income (loss) 2b. Woud a segmented income statement format be more usable to management in assessing the long- run profitability of the various product lines. Yes No

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