Miranda owns Miranda Writing Supplies (MWS). MWS has two main divisions: Mechanical Pencils and Fountain Pens. During the previous year, the Mechanical Pencil line generated $500,000 in sales revenue and had total traceable costs of $240,000, $90,000 of which were fixed costs. The fountain pens generated a segment margin of $150,000. Common fixed costs totaled $350,000 and were arbitrarily allocated across the segments as follows: Mechanical Pencils - $160,000, and Fountain Pens - $190,000. Miranda has shown concern that the Fountain Pen line should be discontinued because it has shown an operating loss for the past couple of years. If the Fountain Pens are dropped, the company would take advantage of the freed-up capacity and would open a new division to replace it. This new division would sell Wood Pencils and is expected to generate $300,000 in sales and have a variable cost percentage of 25%. The Wood Pencil division's traceable fixed costs would total $30,000. Additionally, as a side effect of opening the new division, sales in the Mechanical Pencil division are expected to increase by 4%. Assuming each of the scenarios are independent from each other, which of the following statements is correct? If the Fountain Pens division is dropped and replaced with the Wood Pencil division, the company's operating income would increase by $45,000. The Mechanical Pencil division's contribution margin percentage increases by 4% if the Fountain Pens are dropped and replaced with Wood Pencils. MWS's common fixed costs would decrease by $190,000 if the Fountain Pen division is dropped.