Omar Industries manufactures two products: Regular and Super. The results of operations for 20x1 follow.

	Regular				Super				Total
Units		13,000				3,900				16,900
Sales revenue	$	338,000			$	819,000			$	1,157,000
Less: Cost of goods sold		260,000				468,000				728,000
Gross Margin	$	78,000			$	351,000			$	429,000
Less: Selling expenses		78,000				280,000				358,000
Operating income (loss)	$	0			$	71,000			$	71,000

Fixed manufacturing costs included in cost of goods sold amount to $3 per unit for Regular and $30 per unit for Super. Variable selling expenses are $4 per unit for Regular and $30 per unit for Super; remaining selling amounts are fixed. Omar Industries wants to drop the Regular product line. If the line is dropped, company-wide fixed manufacturing costs would fall by 10% because there is no alternative use of the facilities. What would be the impact on operating income if Regular is discontinued?

Multiple Choice

• $15,600 increase.

• $26,000 increase.

• $0.

• None of the answers is correct.

• $49,400 decrease.