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	$	915,000	$	262,000	$	400,000	$	253,000
Variable manufacturing and selling expenses		471,000		111,000		201,000		159,000
Contribution margin		444,000		151,000		199,000		94,000
Fixed expenses:
Advertising, traceable		70,300		8,900		40,500		20,900
Depreciation of special equipment		43,600		20,800		7,600		15,200
Salaries of product-line managers		115,200		40,300		38,200		36,700
Allocated common fixed expenses*		183,000		52,400		80,000		50,600
Total fixed expenses		412,100		122,400		166,300		123,400
Net operating income (loss)	$	31,900	$	28,600	$	32,700	$	(29,400)

*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