Answer:
Operating income will increase by $16,000. This is not given as one of the options.
Explanation:
The difference between the sales and variable expense gives the contribution margin. The contribution margin net the fixed cost gives the operating income or loss.
                                                      D                         E                    F
Sales revenue                            $90,000        $40,000        $30,000
Variable costs                            <u>($40,000)</u>      <u>($10,000)</u>       <u>($10,000)</u>
Contribution margin                   $50,000        $30,000        $20,000
Fixed costs                                 <u>($10,000) </u>       <u>($5,000)</u>       <u>($25,000)
</u>
Operating income (loss)             $40,000         $25,000       ($5,000)
The total operating income is
= $40,000 + $25,000 + ($5,000)
= $60,000
Should the fixed costs of F be eliminated, the operating income/(loss) of F
= $21,000 - $5,000
= $16,000
This is the net increase in the total operating income.