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	$	925,000	$	262,000	$	408,000	$	255,000
Variable manufacturing and selling expenses		456,000		110,000		191,000		155,000
Contribution margin		469,000		152,000		217,000		100,000
Fixed expenses:
Advertising, traceable		69,400		8,300		41,000		20,100
Depreciation of special equipment		43,400		20,400		7,300		15,700
Salaries of product-line managers		114,700		40,700		38,100		35,900
Allocated common fixed expenses*		185,000		52,400		81,600		51,000
Total fixed expenses		412,500		121,800		168,000		122,700
Net operating income (loss)	$	56,500	$	30,200	$	49,000	$	(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.