Castillo Corporation Has Provided You with the Following Budgeted Income

Multiple Choice

Castillo Corporation has provided you with the following budgeted income statement for one of its products: $$\begin{array} { | l | r | } \hline \text { Sales revenue } & \$ 700,000 \\\hline \text { Variable costs } & ( 430,000 ) \\\hline \text { Contribution margin } & \$ 270,000 \\\hline \text { Fixed costs } & \underline { ( 320,000 ) } \\\hline \text { Operating loss } & \$ ( 50,000 \\\hline\end{array}$$ Castillo has just encountered environmental problems with the product and will be forced to drop the product line altogether.Castillo will be able to eliminate 60% of the fixed costs.What will be the impact on operating income of the company?

A) Operating income will decrease by $192,000.
B) Operating income will decrease by $78,000.
C) Operating income will increase by $192,000.
D) Operating income will increase by $78,000.