Sales revenue $ 5,250,000 6,000,000 Less: Cost of goods sold Gross profit Less: Operating expenses (750,000) 1,600,000 $ (2,350,000) Operating income (loss) Fixed manufacturing overhead costs account for 40% of the cost of goods, while only 30% of the operating expenses are fixed. Since the oatsie ohs line is just one of the company's cereal operations, only $720,000 of direct fixed costs (the majority of which is advertising) will be eliminated if the product line is discontinued. The remainder of the fixed costs will still be incurred by the company