Net Operating Income Impact

uestion 5 (12) The Eggleston Company sells three products. An segmented income statement for the month of May is presented below Total Company Product A Product B Product C S500,000 300,000 200,000 S300,000 120,000 100,000 $200,000 150,000 50,000 Sales Variable costs Contribution margin Traceable fixed costs Segment margin Common fixed costs Net operating income $1,000,000 630,000 370.000 280,000 120,000 60,000 90,000 13000 Eggleston's management is considering dropping Product C. Of that product's monthly traceable fixed costs, $8,000 is for equipment depreciation and S5,000 is the product line manager's salary. The remaining traceable fixed costs for Product C are advertising expenses, which can be eliminated if dropping Product C. The manager would not be laid off, she would be reassigned to a supervisory position in the Product B segment. Her salary would not change The depreciation relates to specialized equipment that has no resale value If Product C is dropped, management estimates that the contribution margin of Product B, will increase by S12,000. However, management would have to lease additional equipment at a monthly rental cost of S5,000 to increase the production levels of Product B to meet the increased demand for that item If product C is dropped, what is the impact on Eggleston's net operating income