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			$	268,000			$	406,000			$	252,000
Variable manufacturing and selling expenses		473,000				115,000				200,000				158,000
Contribution margin		453,000				153,000				206,000				94,000
Fixed expenses:
Advertising, traceable		69,700				8,400				40,400				20,900
Depreciation of special equipment		42,700				20,100				7,300				15,300
Salaries of product-line managers		116,200				40,800				38,900				36,500
Allocated common fixed expenses*		185,200				53,600				81,200				50,400
Total fixed expenses		413,800				122,900				167,800				123,100
Net operating income (loss)	$	39,200			$	30,100			$	38,200			$	(29,100)

*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.)

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