Castillo Corporation Has Provided You with the Following Budgeted Income

Castillo Corporation has provided you with the following budgeted income statement for one of its products: $$\begin{array} { | l | r | } \hline \text { Sales revenue } & \$ 700,000 \\\hline \text { Variable costs } & \underline { ( 430,000 ) } \\\hline \text { Contribution margin } & \$ 270,000 \\\hline \text { Fixed costs } & \underline { ( 310,000 } ) \\\hline \text { Operating loss } & \underline {\$ ( 40,000 ) } \\\hline\end{array}$$ Castillo has just encountered environmental problems with the product and will be forced to drop the product line altogether.Castillo will be able to eliminate 75% of the fixed costs.What will be the impact on operating income of the company?

A) Operating income will decrease by $232,500.
B) Operating income will decrease by $37,500.
C) Operating income will increase by $232,500.
D) Operating income will increase by $37,500.