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: Dirt Mountain Racing Total Bikes Bikes Bikes Sales $ 921,000 $ 267,000 $ 403,000 $ 251,000 Variable manufacturing and selling expenses 468,000 112,000 203,000 153,000 Contribution margin 453,000 155,000 200,000 98,000 Fixed expenses: Advertising, traceable 70,100 8,600 40,700 20,800 Depreciation of special equipment 43,200 20,500 7,500 15,200 Salaries of product-line managers 116,000 40,800 38,600 36,600 Allocated common fixed expenses 184,200 53,400 80,600 50,200 Total fixed expenses 413,500 123,300 167,400 122,800 Net operating income (loss) $ 39,500 $ 31,700 $ 32,600 $ (24,800) *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) 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 Net operating income (loss) 2b. Would a segmented income statement format be more usable to management in assessing the long- run profitability of the various product lines. Yes No