1. Diamond Company has three product lines, A, B, and C. The following financial information is available:

Item	Product Line A				Product Line B				Product Line C
Sales	$	32,000			$	50,000			$	13,000
Variable costs	$	19,200			$	27,000			$	8,125
Contribution margin	$	12,800			$	23,000			$	4,875
Fixed costs:
Avoidable	$	4,400			$	9,500			$	3,300
Unavoidable	$	3,100			$	5,000			$	2,100
Pre-tax operating income	$	5,300			$	8,500			$	(-525	)

Diamond is thinking of dropping Product Line C because it is reporting an operating loss. Assuming the company drops Product Line C and does not replace it, pre-tax operating income for the firm will likely:

• Increase by $1,575

• Decrease by $2,850

• Increase by $1,275

• Decrease by $1,575

• Be unchanged