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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			$	267,000			$	403,000			$	253,000
Variable manufacturing and selling expenses		465,000				118,000				193,000				154,000
Contribution margin		458,000				149,000				210,000				99,000
Fixed expenses:
Advertising, traceable		69,600				8,600				40,700				20,300
Depreciation of special equipment		43,600				20,200				7,900				15,500
Salaries of product-line managers		115,100				40,400				38,900				35,800
Allocated common fixed expenses*		184,600				53,400				80,600				50,600
Total fixed expenses		412,900				122,600				168,100				122,200
Net operating income (loss)	$	45,100			$	26,400			$	41,900			$	(23,200)

*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.)

2a. Prepare a segmented income statement.

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