Here are the results of the two divisions for 2021:

Please note the first column is K and the second

	K
Sales $	2 000 000	4 000 000
Variable costs $	600 000	1 600 000
Margin on variable costs $	1 400 000	2 400 000
Fixed costs $	1 800 000	1 800 000
Net income $	(400 000)	600 000

Y

One study found that $670,000 of Division K's fixed costs are sunk costs. In addition, the elimination of Division K would result in a 20% increase in Division Y's sales with no impact on Division Y's fixed costs.

What would be the effect of discontinuing Division K on the profit of the entire company:

Options from question 5 :

a) the firm's net income increases by $400,000

b) Company's net income decreases by $400,000

c) The firm's net income increases by $210,000

d) the company's net income increases by $530,000

e) No answer is appropriate