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QUESTIONS 26 AND 27 REFER TO THE FOLLOWING: Monthly profit data for two of Yellow Lorry Ltd.'s products, M-1 and F-1, are shown below: M-1 F-1 Total Sales $ 40,000 $ 60,000 $ 100,000 Variable costs 16.000 42,000 58.000 Contribution margin $ 24,000 $ 18,000 $ 42,000 Incremental fixed costs 10,000 20,000 30,000 Segment Margin $ 14,000 $ (2,000) $ 12,000 Allocated corporate costs 2,000 3,000 5,000 Net income (loss) $ 12,000 $ (5,000) $ 7,000 Additional information regarding Yellow Lorry's operations is as follows: One-fourth of each product's incremental fixed costs are unavoidable even if the product is discontinued. - Yellow Lorry allocates corporate costs to each product on the basis of sales dollars. Management estimates that discontinuing F-1 would result in a 10% decline in sales of M-1. However, discontinuing M-1 would not affect sales of F- 26. 27. Discontinuing. F-1 would result in a monthly increase (decrease) in Yellow Lorry's operating income of: a. $(5, 400) b. $ (3,000) c. $(600) d. $10,000 e. none of the above. Yellow Lorry is considering a promotional campaign for F-1 that would not affect sales of M-1. Increasing monthly promotional expenses for F-l by $2,500, which would increase F-l's sales by 10%, would result in a monthly increase (decrease in the company's operating income af: a. $(2,500). b. $(700) c. $250 d. $3,500 e. none of the above