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

Sales	$190000
Variable expenses	105000
Contribution margin	85000
Fixed expenses	130000
Net loss	$ (45000)

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 companys net income will

increase by $7000.

decrease by $7000.

decrease by $85000.

increase by $45000.