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	$	926,000	$	267,000	$	402,000	$	257,000
Variable manufacturing and selling expenses		467,000		117,000		193,000		157,000
Contribution margin		459,000		150,000		209,000		100,000
Fixed expenses:
Advertising, traceable		69,500		8,200		40,400		20,900
Depreciation of special equipment		44,000		20,400		7,800		15,800
Salaries of product-line managers		114,400		40,200		38,400		35,800
Allocated common fixed expenses*		185,200		53,400		80,400		51,400
Total fixed expenses		413,100		122,200		167,000		123,900
Net operating income (loss)	$	45,900	$	27,800	$	42,000	$	(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.

.	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