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	Racking Bikes
Sales	300000	90000	150000	60000
Variable manufacturing and selling expenses	180000	63000	90000	27000
contribugin margin	180,000	63,000	90,000	27,000
Advertising, traceable	30,000	10,000	14,000	6,000
depriciation of special equipment	23,000	6,000	9,000	8,000
salaries of product line managers	35,000	12,000	13,000	10,000
allocated common fixed expenses	60,000	18,000	30,000	12,000
Total fixed expenses	148,000	46,000	66,000	36,000
Net operating income	32,000	17,000	24,000	-9,000

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.

1a. What is the impact on net operating income by discontinuing racing bikes?

	Current total	total if racing bikes are dropped	difference: net poerating income increase or (decrease)
Contributionmarginloss
fixed expenses
Total fixed expenses
Net operating income (loss)

2a. Prepare a segment income statement

	Totals	Dirt bikes	mountain bikes	racing bikes
Contribution margin (loss)
traceable fixed expenses
total traceable fixed expenses
net operating income (loss)