Wolfpack Products has two departments, Red and White. The Income Statement for Wolfpack is given below:

Red White Total

Sales $ 200,000 $300,000 $ 500,000

Variable cost 120,000 150,000 270,000

Fixed cost 100,000 100,000 200,000

Net income $ (20,000) $ 50,000 $ 30,000

Fixed costs are $200,000 per year and are currently allocated evenly between the two departments. The president of Wolfpack Products wants to discontinue the Red Department. None of the fixed costs allocated to the Red Department will be avoided if it is discontinued. If the Red Department is discontinued, what will be the impact on Wolfpack Products net income?

Select one:

a. net income will remain the same.

b. net income will increase by $20,000.

c. net income will decrease by $80,000.

d. net income will decrease by $50,000.

e. net income will decrease by $20,000.