Granfield Company is considering eliminating its backpack division, which reported a loss for the recent year of $42,000 as shown below.

Segment Income (Loss)

Sales $ 960,000

Variable costs 475,000

Contribution margin 485,000

Fixed costs 527,000

Income (loss) $ (42,000)

If the backpack division is dropped, all $475,000 of its variable costs are avoidable, and $210,800 of its fixed costs are avoidable. The impact on Granfields income from eliminating this business segment would be:

$210,800 increase

$485,000 decrease

$274,200 decrease

$485,000 increase

$274,200 increase