Rabbitt Corporation is considering whether to discontinue a division that generates a total contribution margin of $40,000 per year.Fixed manufacturing overhead allocated to this division is $60,000,of which 12,000 is unavoidable.If Rabbitt Corporation were to eliminate this division,the effect on the company's operating income would be a(n):

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If the division is discontinued, the company will save $60,000 in fixed manufacturing overhead, of which $12,000 is unavoidable. This will result in an increase in total operating income of $48,000 ($60,000 - $12,000). However, the division also generates a total contribution margin of $40,000. Therefore, the net effect on the company's operating income will be an increase of $8,000 ($48,000 - $40,000).

Rabbitt Corporation Is Considering Whether to Discontinue a Division That