Your Retail Stores accountant prepared the following income statement for the ladies accessories product line:

Sales $ 3,250,000 Less: Variable expenses 1,527,500 Contribution margin 1,722,500 Less: Fixed expenses: Wages $ 1,170,000 Insurance on inventory 65,000 Advertising 715,000 1,950,000 Net operating income (loss) $ (227,500)

Management is concerned about the loss and is considering dropping the product line. If the product line is dropped, a job has to be created elsewhere for a long-term employee currently earning an annual salary of $97,500.

Required:

Calculate the increase or decrease in the operating income in both alternatives.

Should the ladies accessories product line be dropped?