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	$	932,000	$	267,000	$	406,000	$	259,000
Variable manufacturing and selling expenses		474,000		113,000		203,000		158,000
Contribution margin		458,000		154,000		203,000		101,000
Fixed expenses:
Advertising, traceable		69,900		8,500		40,900		20,500
Depreciation of special equipment		43,300		20,700		7,400		15,200
Salaries of product-line managers		115,500		40,800		38,500		36,200
Allocated common fixed expenses*		186,400		53,400		81,200		51,800
Total fixed expenses		415,100		123,400		168,000		123,700
Net operating income (loss)	$	42,900	$	30,600	$	35,000	$	(22,700)

*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