Lawler Manufacturing Co. has three divisions which are in competition with each other, selling slightly different products. Annual results (including per unit sales)

show:

Sales price per unit Variable cost per unit Total Fixed costs Predicted unit sales

Division A $250

$160 $110,000 10,000

Division B $280

$210 $85,000 5,000

Division C $330

$220 $105,000

3,000

The company believes that if it drops Division B, sales of Division A will increase by

3000 units and sales of Division C will increase by 1000 units. Analysis reveals that $50,000 of fixed costs relating to Division B are avoidable for the company if Division B is closed. The incremental effect on the income of the company if it closes Division B will be:

A. An increase of $30,000 B. An increase of $50,000 C. A decrease of $70,000 D. An increase of $80,000