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			$	265,000			$	405,000			$	256,000
Variable manufacturing and selling expenses		469,000				117,000				200,000				152,000
Contribution margin		457,000				148,000				205,000				104,000
Fixed expenses:
Advertising, traceable		69,800				8,300				40,600				20,900
Depreciation of special equipment		44,200				20,500				7,800				15,900
Salaries of product-line managers		115,000				40,500				38,500				36,000
Allocated common fixed expenses*		185,200				53,000				81,000				51,200
Total fixed expenses		414,200				122,300				167,900				124,000
Net operating income (loss)	$	42,800			$	25,700			$	37,100			$	(20,000)

*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 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.)

1b. Should production and sale of the racing bikes be discontinued?

	Yes
	No

2a. Prepare a segmented income statement.

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