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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: Total Dirt Bikes Mountain Bikes Racing Bikes Sales $ 926,000 $ 261,000 $ 410,000 $ 255,000 Variable manufacturing and selling expenses 464,000 115,000 199,000 150,000 Contribution margin 462,000 146,000 211,000 105,000 Fixed expenses: Advertising, traceable 69,000 8,200 40,300 20,500 Depreciation of special equipment 43,700 20,900 7,100 15,700 Salaries of product-line managers 114,400 40,600 38,600 35,200 Allocated common fixed expenses* 185,200 52,200 82,000 51,000 Total fixed expenses 412,300 121,900 168,000 122,400 Net operating income (loss) $ 49,700 $ 24,100 $ 43,000 $ (17,400) *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) Should production and sale of the racing bikes be discontinued? Yes No Prepare a segmented income statement. totals Dirt bike Mountain bikes Racing bikes Contribution margin (loss) Fixed expenses: Total traceable fixed expenses Net operating income (loss) Would 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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