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	$	929,000			$	269,000			$	403,000			$	257,000
Variable manufacturing and selling expenses		470,000				120,000				192,000				158,000
Contribution margin		459,000				149,000				211,000				99,000
Fixed expenses:
Advertising, traceable		69,200				8,500				40,500				20,200
Depreciation of special equipment		43,100				20,600				7,100				15,400
Salaries of product-line managers		115,200				40,900				38,700				35,600
Allocated common fixed expenses*		185,800				53,800				80,600				51,400
Total fixed expenses		413,300				123,800				166,900				122,600
Net operating income (loss)	$	45,700			$	25,200			$	44,100			$	(23,600)

*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 or 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 or no