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	$	920,000	$	262,000	$	402,000	$	256,000
Variable manufacturing and selling expenses		467,000		114,000		199,000		154,000
Contribution margin		453,000		148,000		203,000		102,000
Fixed expenses:
Advertising, traceable		69,900		8,600		40,700		20,600
Depreciation of special equipment		43,600		20,400		7,800		15,400
Salaries of product-line managers		115,000		40,200		38,700		36,100
Allocated common fixed expenses*		184,000		52,400		80,400		51,200
Total fixed expenses		412,500		121,600		167,600		123,300
Net operating income (loss)	$	40,500	$	26,400	$	35,400	$	(21,300)

*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.)

	Current total	total if racing bikes are dropped	Difference: Net operating income increase or (Decrease)
?	?	?	?
?	?	?	?
Contribution margin: (loss)	?	?	?
Fixed expense:	-	-	-
?	?	?	?
?	?	?	?
?	?	?	?
?	?	?	?
Total fixed expenses	?	?	?
Net operating income (loss)	?	?	?

** On the first column insert from the list stated in the bottom with the missing ?**

(sales, variable expenses, advertising traceable , depreciation on special equipment, salaries of product managers, common allocated costs)

2a.	Prepare a segmented income statement.

	Totals	Dirt Bike	Mountain Bikes	Racing Bikes
?	?	?	?	?
?	?	?	?	?
Contribution margin (loss)	?	?	?	?
Traceable fixed expenses:	-	-	-	-
?	?	?	?	?
?	?	?	?	?
?	?	?	?	?
Total traceable fixed expenses	?	?	?	?
?	?	?	?	?
?	?	-	-	-
Net operating income (loss)	?	-	-	-

** On the first column insert from the list stated in the bottom with the missing ?**

(Sales, Variable manufacturing and selling expenses, Advertising, depreciation of special equipment, salaries of the product line managers, product line segment margin, common fixed expenses)