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	$	918,000			$	266,000			$	401,000			$	251,000
Variable manufacturing and selling expenses		467,000				116,000				195,000				156,000
Contribution margin		451,000				150,000				206,000				95,000
Fixed expenses:
Advertising, traceable		69,200				8,500				40,200				20,500
Depreciation of special equipment		44,100				20,800				7,700				15,600
Salaries of product-line managers		114,900				40,700				38,700				35,500
Allocated common fixed expenses*		183,600				53,200				80,200				50,200
Total fixed expenses		411,800				123,200				166,800				121,800
Net operating income (loss)	$	39,200			$	26,800			$	39,200			$	(26,800)

*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