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	$	934,000	$	268,000	$	406,000	$	260,000
Variable manufacturing and selling expenses		468,000		116,000		196,000		156,000
Contribution margin		466,000		152,000		210,000		104,000
Fixed expenses:
Advertising, traceable		69,500		8,300		40,300		20,900
Depreciation of special equipment		43,800		21,000		7,500		15,300
Salaries of product-line managers		115,500		40,200		38,400		36,900
Allocated common fixed expenses*		186,800		53,600		81,200		52,000
Total fixed expenses		415,600		123,100		167,400		125,100
Net operating income (loss)	$	50,400	$	28,900	$	42,600	$	(21,100)

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

2a.	Prepare a segmented income statement.

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