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			$	263,000			$	409,000			$	251,000
Variable manufacturing and selling expenses		467,000				114,000				194,000				159,000
Contribution margin		456,000				149,000				215,000				92,000
Fixed expenses:
Advertising, traceable		70,200				8,800				40,600				20,800
Depreciation of special equipment		43,300				20,900				7,200				15,200
Salaries of product-line managers		114,600				40,700				38,300				35,600
Allocated common fixed expenses*		184,600				52,600				81,800				50,200
Total fixed expenses		412,700				123,000				167,900				121,800
Net operating income (loss)	$	43,300			$	26,000			$	47,100			$	(29,800)

*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