E$8-44$B$.$ Discontinuing a product line $($Learning Objective $4)$

Suppose Eagle Products is considering discontinuing its soy cereal product line. Assume that during the past year, the soy cereal product line income statement showed the following:

$\backslash$table$[[Z_{{?}_{?}},$A$,,$B$,$C$,$D$],[1,$Sales revenue,$$,5,250,000,,],[2,$Less: Cost of goods sold,,$6,250,000,,],[3,$Gross profit,$$,(1,000,000),,],[4,$Less: Operating expenses,,$1,550,000,,],[5,$Operating income $($loss$),,(2,550,000),,]]$

Fixed manufacturing overhead costs account for $40\%$ of the cost of goods, while only $30\%$ of the operating expenses are fixed. Since the soy cereal line is just one of the company's breakfast cereals, only $$725,000$ of direct fixed costs $($the majority of which is advertising$)$ will be eliminated if the product line is discontinued. The remainder of the fixed costs will still be incurred by the company. If the company decides to discontinue the product line, what will happen to the company's operating income? Should Eagle Products discontinue the soy cereal product line?