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	$	917,000			$	266,000			$	400,000			$	251,000
Variable manufacturing and selling expenses		474,000				119,000				203,000				152,000
Contribution margin		443,000				147,000				197,000				99,000
Fixed expenses:
Advertising, traceable		70,400				8,600				40,800				21,000
Depreciation of special equipment		43,200				20,700				7,200				15,300
Salaries of product-line managers		115,700				40,300				39,000				36,400
Allocated common fixed expenses*		183,400				53,200				80,000				50,200
Total fixed expenses		412,700				122,800				167,000				122,900
Net operating income (loss)	$	30,300			$	24,200			$	30,000			$	(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.)

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