Meditate to Elevate is a wholesaler of gear to yoga studios. The company sells three product lines: Ujjayi, Drishti, and Tapas. A traditional departmental income statement for the year ended 12.31.20 is shown below:

	Ujjayi	Drishti	Tapas
Sales Revenue	$100,000	$30,000	$37,500
(Cost of Goods Sold)	(60,000)	(18,000)	(30,250)
Gross Profit	40,000	12,000	7,250
(Operating Expenses)	(30,000)	(14,000)	(3,375)
Operating Income	$10,000	$(2,000)	$3,875

30% of the cost of goods sold for each product line is variable. The remaining cost of goods sold for each product line consists of traceable fixed costs. Operating expenses for each product line include $2,000 of common fixed costs. The remaining operating expenses consist of variable costs.Due to profitability concerns, management is considering dropping the Drishti product line. If Drishti is dropped, the freed up capacity would be used to expand Ujjayi's operations. As a result, Ujjayi's sales volume would increase by 20%, and its traceable fixed costs would increase by $5,000 due to costs related to expansion. The loss of Drishti and the expansion of Ujjayi would result in a 2% decrease in Tapas's sales volume. What would be the annual change in operating income if Drishti is dropped?

A.

decrease of $7,717.50

B.

increase of $1,979,00

C.

increase of $5,259.00

D.

decrease of $2,145.00