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	$	921,000	$	263,000	$	402,000	$	256,000
Variable manufacturing and selling expenses		467,000		119,000		192,000		156,000
Contribution margin		454,000		144,000		210,000		100,000
Fixed expenses:
Advertising, traceable		69,900		8,800		40,200		20,900
Depreciation of special equipment		43,300		20,500		7,500		15,300
Salaries of product-line managers		115,600		41,000		38,100		36,500
Allocated common fixed expenses*		184,200		52,600		80,400		51,200
Total fixed expenses		413,000		122,900		166,200		123,900
Net operating income (loss)	$	41,000	$	21,100	$	43,800	$	(23,900)

*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)	0	0	0
Fixed expenses:
Total fixed expenses	0	0	0
Net operating income (loss)	$0	$0	$0

2a.	Prepare a segmented income statement.

	Totals	Dirt Bikes	Mountain Bikes	Racing Bikes
Contribution margin (loss)	0	0	0	0
Traceable fixed expenses:
Total traceable fixed expenses	0	0	0	0
	0	$0	$0	$0
Net operating income (loss)	$0