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	$	919,000			$	264,000			$	403,000			$	252,000
Variable manufacturing and selling expenses		480,000				114,000				208,000				158,000
Contribution margin		439,000				150,000				195,000				94,000
Fixed expenses:
Advertising, traceable		68,800				8,100				40,200				20,500
Depreciation of special equipment		43,700				20,500				7,600				15,600
Salaries of product-line managers		116,400				40,900				38,700				36,800
Allocated common fixed expenses*		183,800				52,800				80,600				50,400
Total fixed expenses		412,700				122,300				167,100				123,300
Net operating income (loss)	$	26,300			$	27,700			$	27,900			$	(29,300)

*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