Camera Corner is considering eliminating Model AE2 from its camera line because of losses over the past quarter. The past three months of information for Model AE2 are summarized below:

Sales (1,000units)$300,000

Manufacturing costs:

Directmaterials150,000

Direct labor ($15/hour) 60,000

Overhead100,000

Operatingloss($10,000)

Overhead costs are 70% avoidable and the remaining 30% is the depreciation of special equipment that will be used for manufacturing a different model.

If Model AE2 is dropped from the product line, operating income will:

decrease by $20,000

decrease by $10,000

increase by $10,000

increase by $30,000