Granfield Company is considering eliminating its backpack division, which reported an operating loss for the recent year of $42,000. The division sales for the year were $960,000 and the variable costs were $475,000. The fixed costs of the division were $527,000. If the backpack division is dropped, 40% of the fixed costs allocated to that division could be eliminated. The impact on Granfield's operating income for eliminating this business segment would be:

$485,000 decrease

$210,800 increase

$274,200 decrease

$485,000 increase

$274,200 increase