ABC Company operates three segments, of which two of them were showing a loss.

	Segment 1	Segment 2	Segment 3	Total
Sales	$100,000	$200,000	$300,000	$600,000
Less Cost of goods sold	80,000	150,000	200,000	430,000
Gross margin.	20,000	50,000	100,000	170,000
Less Operating expenses	30,000	70,000	70,000	170,000
Net operating income.	$(10,000)	$(20,000)	$30,000	$0

For each segment, 40% of its cost of goods sold and operating expenses are variable expenses and the remaining balances are fixed expenses. Total fixed expenses (operating and manufacturing) were allocated to each segment as follows:

Fixed Expenses Allocated to Each Segment
Segment 1	$10,000
Segment 2	$40,000
Segment 3	$70,000

What would be the effect on the companys overall profit if Segment 2 was dropped from their revenue line?

Select one:

a. Overall companys profit will increase by $50,000.

b. Overall companys profit will increase by $90,000

c. Overall companys profit will increase by $60,000.

d. Overall companys profit will decrease by $20,000.