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	$	927,000			$	268,000			$	407,000			$	252,000
Variable manufacturing and selling expenses		473,000				113,000				204,000				156,000
Contribution margin		454,000				155,000				203,000				96,000
Fixed expenses:
Advertising, traceable		69,700				8,600				40,900				20,200
Depreciation of special equipment		44,400				20,900				7,600				15,900
Salaries of product-line managers		113,700				40,300				38,100				35,300
Allocated common fixed expenses*		185,400				53,600				81,400				50,400
Total fixed expenses		413,200				123,400				168,000				121,800
Net operating income (loss)	$	40,800			$	31,600			$	35,000			$	(25,800)

*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