A company has three product lines, one of which reflects the following results:
Sales $215,000
Variable expenses 125,000
Contribution margin 90,000
Fixed expenses 130,000
Net loss $ (40,000)
If this product line is eliminated, 60% of the fixed expenses can be eliminated and the other 40% will be allocated to other product lines. If management decides to eliminate this product line, the company's net income will
a. increase by $40,000.
b. decrease by $90,000.
c. decrease by $12,000.
d. increase by $12,000.
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