Which Answer is Correct?

State Road Fabricators Inc. is considering eliminating Model A02777 because of losses over the past quarter. The past three months of information for Model A02777 are summarized below: $330,000 Sales (1.400 units) Manufacturing costs: Direct materials Direct labor ($15 per hour) Overhead Operating loss 180,000 70,000 130,000 ($50,000) Overhead costs are 60% variable and the remaining 40% is depreciation of special equipment for model A02777 that has no resale value. If Model A02777 is dropped from the product line, operating income will O A. decrease by $50,000 OB. increase by $52,000 c. increase by $50,000 D. decrease by $2,000