If this product line is eliminated 60 of the fixed expenses

Question

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                                           140,000

Net loss                                                      $ (50,000)

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

• increase by 50,000
• increase by 6,000
• decrease by 6,000
• decrease by 90,000