Molina Medical Supply Company is trying to decide whether or not to continue distributing hospital supplies. The following information is available for Molina%u2019s business segments. Assume that all direct fixed costs could be avoided if a segment is dropped and that the total common fixed costs would remain unchanged if a segment is dropped.

	Hospital Supplies		Retail Stores		Mail Order
Sales	$120,000		$440,000		$360,000
Variable costs	64,000		200,000		140,000
Contribution Margin	56,000		240,000		220,000
Direct Fixed Costs	50,000		80,000		90,000
Allocated common fixed costs	20,000		70,000		60,000
Net Income	($ 14,000)		$ 90,000		$ 70,000

Assume that if hospital supplies were dropped, retail store sales would increase by 25%. What would the impact on overall profitability be if the %u201CHospital Supplies%u201D segment is eliminated?

Income would increase by $54,000.

Income will increase by $104,000.

Income will increase by $14,000.

Income will increase by $60,000.