Mackenzie Ltd. manufactures and sells two items, products A and B. The company is considering dropping product B. It is expected that sales of product A will increase by 30% as a result. If product B is dropped fixed costs of $2,000 will be avoided. An income statement with both products follows.

Sales 510,000 53,000 518,000 Direct materials 2,500 2,000 4,500 Direct labour 2% w m Contribution margin 55,500 4,800 10,300 Fixed costs 1E m m Operating income M m 3 4,300 What impact will dropping Product B have on Mackenzie's monthly operating income? a. Increase by $800 b. Increase by $1,980 c. Decrease by $2,820 d. Decrease by $1,150