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	$	920,000			$	262,000			$	400,000			$	258,000
Variable manufacturing and selling expenses		474,000				115,000				205,000				154,000
Contribution margin		446,000				147,000				195,000				104,000
Fixed expenses:
Advertising, traceable		69,100				8,300				40,400				20,400
Depreciation of special equipment		43,800				20,500				7,400				15,900
Salaries of product-line managers		115,200				40,900				38,600				35,700
Allocated common fixed expenses*		184,000				52,400				80,000				51,600
Total fixed expenses		412,100				122,100				166,400				123,600
Net operating income (loss)	$	33,900			$	24,900			$	28,600			$	(19,600)

*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.)

2a. Prepare a segmented income statement.

Difference: Net Total If Racing Bikes Are Dropped Operating Income Increase or (Decrease) Current Total Contribution margin (loss) Fixed expenses Total fixed expenses Net operating income (loss)