The Blackboard Cafe owns a single restaurant, which has a small bar used to seat patrons while they wait on their tables. The owner is considering eliminating the bar area and including more restaurant seating. Segmented contribution income statements are as follows and fixed costs applicable to both segments are allocated on the basis of square footage.

Restaurant Bar Total

Sales $800,000 $200,000 $1,000,000

Variable costs 475,000 160,000 635,000

Direct fixed costs 50,000 15,000 65,000

Allocated fixed costs 212,500 37,500 250,000

Net income $ 62,500 ($ 12,500) $ 50,000

What effect will occur if the Blackboard eliminates the bar if there is no effect on restaurant sales?

A) Net income will increase by $12,500. B) Net income will be $62,500.

C) Net income will decline by $25,000.

D) Net income will decrease to $37,500.