Brevard Industries produces two products. Information about the products is as follows:

	Product 1				Product 2
Units produced and sold		4,000				10,000
Selling price per unit	$	15			$	13
Variable costs per unit		9				8

The company's fixed costs totaled $70,000, of which $15,000 can be directly traced to Product 1 and $40,000 can be directly traced to Product 2. The effect on the firm's profits if Product 2 is dropped would be a:

Multiple Choice

• $10,000 increase.

• $35,000 increase.

• $35,000 decrease.

• $10,000 decrease.