Dalton Company follows a policy of allocating all common costs equally among its profit centers. A partial responsibility income statement for a typical month is shown below:

	Dalton Company	Profit Center 1	Profit Center 2	Profit Center 3
Responsibility margins	$ 215,000	$ 85,000	$ 75,000	$ 55,000
Common fixed costs	$ 178,500	$ 59,500	$ 59,500	$ 59,500
Income from operations	$ 36,500	$ 25,500	$ 15,500	$ (4,500)

After evaluating these data, Dalton Company decides to close Profit Center 3. This action eliminates all revenue, variable costs, and fixed costs traceable to Center 3, but eliminates only $39,000 in common fixed costs. Closing Profit Center 3 has no effect upon the responsibility margins of Centers 1 and 2.

Closing Profit Center 3 should cause Dalton's monthly operating income to:

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Multiple Choice

Decrease by $20,500.

Increase by $16,000.

Increase by $4,500.

Decrease by $16,000.

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