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	$	262,000	$	404,000	$	260,000
Variable manufacturing and selling expenses		461,000		111,000		191,000		159,000
Contribution margin		465,000		151,000		213,000		101,000
Fixed expenses:
Advertising, traceable		69,600		8,900		40,500		20,200
Depreciation of special equipment		43,600		20,300		7,400		15,900
Salaries of product-line managers		115,200		41,000		38,400		35,800
Allocated common fixed expenses*		185,200		52,400		80,800		52,000
Total fixed expenses		413,600		122,600		167,100		123,900
Net operating income (loss)	$	51,400	$	28,400	$	45,900	$	(22,900)

*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.) Difference: Net Total If ing Operating Bikes Are Increase Dropped or (Decrease) Current Total 0 0 0 Contribution margin (loss) Fixed expenses: 0 0 0 Total fixed expenses Net operating income loss) OS 1b. Should production and sale of the racing bikes be discontinued? Yes O No 2a. Prepare a seg income statement. mented Totals Dirt Bikes Mountain Bikes Racing Bikes 0 0 0 0 Contribution margin (loss) Traceable fixed expenses: 0 0 0 0 Total traceable fixed expenses 0 o o 0 Net operating income (oss) 2b. Would a segmented income statement format be more usable to n assessing the longrun profitability of the various product lines. Yes No