Cambridge Roller Skates has three product lines—D, E, and F

The following information is available:

D E F
Sales revenue $70,000 $50,000 $30,000
Variable costs (30,000 ) (10,000 ) (12,000 )
Contribution margin $40,000 $40,000 $18,000
Fixed costs (20,000 ) (5,000 ) (25,000 )
Operating income (loss) $20,000 $35,000 $(7,000 )

The company is deciding whether to drop product line F because it has an operating loss. Assume that $21,000 of total fixed costs could be eliminated by dropping F. What effect would this decision have on operating income?
A) Operating income will increase by $25,000.
B) Operating income will increase by $3,000.
C) Operating income will decrease by $25,000.
D) Operating income will decrease by $3,000.

B .B)
Expected decrease in revenue $(30,000 )
Expected decrease in total variable costs $12,000
Expected decrease in fixed costs $21,000
Expected decrease in total costs 33,000
Expected increase in operating income $3,000