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	$	270,000	$	402,000	$	254,000
Variable manufacturing and selling expenses		463,000		119,000		193,000		151,000
Contribution margin		463,000		151,000		209,000		103,000
Fixed expenses:
Advertising, traceable		69,900		8,700		40,400		20,800
Depreciation of special equipment		44,100		20,500		7,800		15,800
Salaries of product-line managers		115,500		40,100		38,800		36,600
Allocated common fixed expenses*		185,200		54,000		80,400		50,800
Total fixed expenses		414,700		123,300		167,400		124,000
Net operating income (loss)	$	48,300	$	27,700	$	41,600	$	(21,000)

*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.

1a.

What is the impact on net operating income by discontinuing racing bikes?

2a.	Prepare a segmented income statement.