Macaulay Company Has Three Product Lines-D, E, and F

Multiple Choice

Macaulay Company has three product lines-D, E, and F. The following information is available: Macaulay Company is thinking of dropping product line F because it is reporting an operating loss. Assuming fixed costs are unavoidable, if Macaulay Company drops product line F and does not replace it, what effect will this have on operating income?

A) Operating income will increase $5,000.
B) Operating income will increase $20,000.
C) Operating income will increase $25,000.
D) Operating income will decrease $20,000.