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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	$	919,000	$	265,000	$	400,000	$	254,000
Variable manufacturing and selling expenses		478,000		116,000		203,000		159,000
Contribution margin		441,000		149,000		197,000		95,000
Fixed expenses:
Advertising, traceable		69,700		8,400		40,600		20,700
Depreciation of special equipment		43,200		20,100		7,400		15,700
Salaries of product-line managers		114,600		40,400		38,100		36,100
Allocated common fixed expenses*		183,800		53,000		80,000		50,800
Total fixed expenses		411,300		121,900		166,100		123,300
Net operating income (loss)	$	29,700	$	27,100	$	30,900	$	(28,300)

*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.) Current total total if racing bikes are dropped Difference: Net operating income increase or (Decrease) ? ? ? ? ? ? ? ? Contribution margin: (loss) ? ? ? Fixed expense: - - - ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Total fixed expenses ? ? ? Net operating income (loss) ? ? ? ** On the first column insert from the list stated in the bottom with the missing ?** (sales, variable expenses, advertising traceable , depreciation on special equipment, salaries of product managers, common allocated costs)

2a.	Prepare a segmented income statement.

	Totals	Dirt Bike	Mountain Bikes	Racing Bikes
?	?	?	?	?
?	?	?	?	?
Contribution margin (loss)	?	?	?	?
Traceable fixed expenses:	-	-	-	-
?	?	?	?	?
?	?	?	?	?
?	?	?	?	?
Total traceable fixed expenses	?	?	?	?
?	?	?	?	?
?	?	-	-	-
Net operating income (loss)	?	-	-	-

** On the first column insert from the list stated in the bottom with the missing ?**

(Sales, Variable manufacturing and selling expenses, Advertising, depreciation of special equipment, salaries of the product line managers, product line segment margin, common fixed expenses)

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