A company has three product lines, one of which reflects the following results:

Sales $215,000
Variable expenses 125,000
Contribution margin 90,000
Fixed expenses 130,000
Net loss $(40,000)
If this product line is eliminated, 60% of the fixed expenses can be eliminated and the other 40% will be allocated to other product lines. If management decides to eliminate this product line, the company's net income will
a) decrease by $12,000.
b) increase by $40,000.
c) increase by $12,000.
d) decrease by $90,000.

Answer: a) decrease by $12,000.