25. A merchandising company has two departments, A and B. A recent monthly income statement for the company follows: Sales Less: variable expenses Contribution margin Department A $2,500,000 Department B $1,500,000 1,000,000 gal of 600,000 1,500,000 Less: fixed expenses Operating income (loss) 900,000 $ 600,000 900,000 1,100,000 $ (200,000) A study indicates that $400,000 of the fixed expenses being charged to Department B are sunk costs or allocated costs that will continue even if B is dropped. In addition, the elimination of Department B will result in a 10% decrease in the sales of Department A. If Department B is dropped, what will be the effect on the net operating income of the company as a whole? a. Increase $50,000. b. Increase $150,000. e. Decrease $350,000. 4. Decrease $450,000. e. None of the above.