Carns Company is considering eliminating its small tools division, which reported an operating loss for the recent year of $85,000. Division sales for the year were $1,310,000 and its variable costs were $1,175,000. The fixed costs of the division were $220,000. If the kitchen division is dropped, 45% of the fixed costs allocated it could be eliminated. The impact on Carns's operating income from eliminating the small tools division would be:
a. $74,200 decrease
b. $36,000 decrease
c. $220,000 decrease
d. $36,000 increase
e. $99.000 decrease
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