ABC Company is a discount department store that has three major departments, groceries, general merchandise and drugs. Management is considering dropping groceries, which have consistently shown a net loss. The space vacated by the dropping of groceries would remain idle and the common fixed cost would remain the same. The following is the financials for the three departments: Total Groceries Merchandise Drugs Sales ALCA CA 1,900 $ 1,000 $ 800 $ 100 Variable costs 1,420 $ 560 $ 60 Contribution margin 480 200 240 $ 40 Fixed expense Direct fixed costs 150 $ 100 $ 15 Common fixed costs CA CA 265 $ 180 60 100 $ 20 Operating income $ 35 $ (10) $ 40 $ 5 Required: a) Compute the change of operating income if the company drop groceries (4 Marks) b) Should the company drop groceries? (1 Mark) c) Assume the company wants to use the space made available by the dropping of groceries to expand the general merchandise department. The general merchandise expansion would increase sales and costs as follows: Increase in sales 500 Increase in direct fixed costs $ 70 The contribution margin of the increased general merchandise sales remains the same as before the expansion. Required: Compute the change in operating income if the company decides to dro (4 Marks) the groceries department and expand the general merchandise department