Oneco Industries manufactures two products: Works and Best. The results of operations for 20x1 follow.

	Works				Best				Total
Units		15,000				4,000				19,000
Sales revenue	$	420,000			$	760,000			$	1,180,000
Less: Cost of goods sold		330,000				420,000				750,000
Gross Margin	$	90,000			$	340,000			$	430,000
Less: Selling expenses		90,000				210,000				300,000
Operating income (loss)	$	0			$	130,000			$	130,000

Fixed manufacturing costs included in cost of goods sold amount to $2 per unit for Works and $30 per unit for Best. Variable selling expenses are $3 per unit for Works and $30 per unit for Best; remaining selling amounts are fixed.

Oneco Industries wants to drop the Works product line. If the line is dropped, company-wide fixed manufacturing costs would fall by 20% because there is no alternative use of the facilities. What would be the impact on operating income if Works is discontinued?

Multiple Choice

• $45,000 increase.

• $45,000 decrease.

• $30,000 increase.

• $0.

• None of the answers is correct.