1. ABC Company has three product linesD, E, and F. The following information is available:

	D	E	F
Sales revenue	$90,000	$40,000	$31,000
Variable costs	(40,000)	(15,000)	(10,000)
Contribution margin	$50,000	$25,000	$21,000
Fixed costs	(20,000)	(15,000)	(23,000)
Operating income (loss)	$30,000	$10,000	$(2000)

The company is deciding whether to drop product line F because it has an operating loss. Assuming fixed costs are unavoidable, if ABC drops product line F, what effect will this have on operating income?

Select one:

A.

Operating income will increase $2000.

B.

Operating income will increase $21,000.

C.

Operating income will increase $23,000.

D.

Operating income will decrease $21,000.