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	$	923,000			$	262,000			$	406,000			$	255,000
Variable manufacturing and selling expenses		469,000				119,000				199,000				151,000
Contribution margin		454,000				143,000				207,000				104,000
Fixed expenses:
Advertising, traceable		69,600				8,100				40,900				20,600
Depreciation of special equipment		42,600				20,300				7,100				15,200
Salaries of product-line managers		115,100				40,300				38,800				36,000
Allocated common fixed expenses*		184,600				52,400				81,200				51,000
Total fixed expenses		411,900				121,100				168,000				122,800
Net operating income (loss)	$	42,100			$	21,900			$	39,000			$	(18,800)

*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