C is corrent. The solutions approach is to isolate those revenues and costs that would differ if the department is discontinued. If the department is discontinued, $48,000 of contribution margin would be lost. The $42,000 will continue regardless of the decision made. Thus, $54,000 ($96,000 - $42,000) of allocated overhead cost would be eliminated or avoided. The net effect on pretax profit would be an increase of $6,000 ($54,000 of cost avoided less $48,000 of contribution margin lost).
A is incorrect. This is an incorrect computation of the effect.
B is incorrect. This does not consider the fixed costs that will be eliminated.
D is incorrect. This does not consider the lost contribution margin.
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