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	$	262,000	$	409,000	$	250,000
Variable manufacturing and selling expenses		461,000		115,000		194,000		152,000
Contribution margin		460,000		147,000		215,000		98,000
Fixed expenses:
Advertising, traceable		69,600		8,200		40,400		21,000
Depreciation of special equipment		43,800		20,300		7,600		15,900
Salaries of product-line managers		114,700		40,300		38,900		35,500
Allocated common fixed expenses*		184,200		52,400		81,800		50,000
Total fixed expenses		412,300		121,200		168,700		122,400
Net operating income (loss)	$	47,700	$	25,800	$	46,300	$	(24,400)

*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