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Oneco Industries manufactures two products: Works and Best. The results of operations for 20x1 follow. Works Best Total Units 10,000 4,100 14,100 Sales revenue $

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

Works Best Total
Units 10,000 4,100 14,100
Sales revenue $ 250,000 $ 943,000 $ 1,193,000
Less: Cost of goods sold 200,000 574,000 774,000
Gross Margin $ 50,000 $ 369,000 $ 419,000
Less: Selling expenses 50,000 226,000 276,000
Operating income (loss) $ 0 $ 143,000 $ 143,000

Fixed manufacturing costs included in cost of goods sold amount to $2 per unit for Works and $20 per unit for Best. Variable selling expenses are $3 per unit for Works and $20 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?

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